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Casino Capitalism: Neoliberalism in Western countries

"When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done"

John Maynard Keynes

PseudoScience > Who Rules America > Neoliberalism

News Neoliberalism Recommended Links Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy Peak Cheap Energy and Oil Price Slump Regulatory Capture & Corruption of regulators Neocolonialism as Financial Imperialism
Ayn Rand and Objectivism Cult Energy returned on energy invested (EROEI) The Systemic Instability of Financial Institutions In Goldman Sachs we trust Number racket GDP as a false measure of a country economic output Neoliberalism as a Cause of Structural Unemployment in the USA
Neoliberalism and rising inequality Secular Stagnation  Efficient Market Hypothesis Redistribution of wealth up as the essence of neoliberalism Supply side Voodoo Rational expectations scam Monetarism fiasco
Twelve apostles of deregulation Summers Greenspan Rubin Reagan Helicopter Ben: Arsonist Turned into Firefighter Bush II
Chicago school of deification of market Free Market Fundamentalism Free Market Newspeak as opium for regulators The Idea of Dynamic Stochastic General Equilibrium CDS -- weapons of mass financial destruction Phil Gramm Clinton
Zombie state of neoliberalism Insider Trading SEC corruption Fed corruption Systemic Fraud under Clinton-Bush Regime Wall Street Propaganda Machine American Exceptionalism
Pseudo Theories and Crooked and Bought Theorists Glass-Steagall repeal Pope Francis on danger of neoliberalism Fiat money, gold and petrodollar Neoliberalism as a Cause of Structural Unemployment in the USA Buyout Kleptocrats Republican Economic Policy
Principal-agent problem Quiet coup Pecora commission History of Casino Capitalism Casino Capitalism Dictionary :-) Humor Etc
Sine ira et studio

Tacitus, see Wikipedia


Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also have considered the possibility that, just as Keynes’s ideas were tested to destruction in the 1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men … are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.

Martin Wolf

Speculation and gambling were always a part of Wall Street but since the 1930’s they were just a side-show, now they are the show.

comment to Matt Taibbi article Fannie, Freddie, and the New Red and Blue t

Introduction

History

The concept of Quite Coup

Stages of transformation

Casino Capitalism as a result of stagnation of industrial manufacturing

Casino Capitalism and Financial Instability

The Ideology of Casino Capitalism

Early Researchers of Casino Capitalism

Conclusions: From Animal Farm To Animal House


Introduction

“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”

-- John Kenneth Galbraith, The Great Crash of 1929

The term Casino Capitalism as a specific phase of neoliberal transformation of capitalism. Politically it was slow motion corporate coup d'état, which started in 70th and is now accomplished in the USA and other Western countries which buries social-democratic (New Deal style) model of capitalism.  It hypertrophied police functions of state (in the form of national-security state)  while completely avoiding economic sphere in ways other then enforcement of laws (with a notable exclusion from this top 1% -- Masters of the Universe). In this sense it is the opposite of communism (i.e. an entirely state-planned economy) and presupposed a deregulated economy (in a sense of the "law of jungle" as a business environment) , but with extremely strong militarized state, suppressing all the attempts to challenge the new "nomenklatura" (much like was the case in the USSR).  It is also called economic liberalism or neoliberalism

“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate “liberals” — meaning the political type — have no real problem with economic liberalism, including neoliberalism.

In other words this is a variant of neoliberal model of corporatism used in wealthy Western countries during the period of "cheap hydrocarbons".  The period that is probably near the end and which by some estimate can last only another 50 years or so.  The major crisis of casino capitalism in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of extracting return on capital, typical for casino capitalism),  but also with the rise of the price of oil and decrease of  Energy returned on energy invested (EROEI)In this sense the current low oil price period that started in late 2014 can be viewed as the "last hurrah" of the casino capitalism.

The term itself was coined by Susan Strange who used it as a title of her book Casino Capitalism published in 1986. She was one of the first who realized that

  1. "The roots of the world's economic disorder are monetary and financial";
  2. "The disorder has not come about by accident, but has in fact been nurtured and encouraged by a series of government decisions." (p. 60). In other words its was a counter-revolution of the part of ruling elite which lost its influence in 30th (dismantling New Deal from above in the USA (Reaganomics) or Thatcherism in the GB).

According to Susan Strange transformation of industrial capitalism into neoliberal capitalism ("casino capitalism") involved five trends. All of them increased the systemic instability of the system and the level of political corruption:

  1. Innovations in the way in which financial markets work due to introduction of computers;
  2. The sheer size of markets;
  3. Commercial banks turned into investment banks;
  4. The emergence of Asian nations as large players;
  5. The shift to self-regulation by banks (pp.9-10).

Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal "casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor.  The same is true about globalization, especially about globalization of financial flows, typical for casino capitalism.

Also this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism" which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the financial capitalism is unstable in the same sense as radioactive elements are unstable.  And this instability tend to increase with time. So there is probably natural half-life period for neoliberalism as a social system. It might be already reached in 2008.  In we assume that global victory of neoliberalism happened in 1990. It is just 18 years.  If we think that it happened in late 60th, then it is closer to 50 years.

The global crisis of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free markets" lead to faster and more uniform economic development of all countries. While the peak of its "ideological" power might be over (much like the peak of attractiveness of "command socialism" was over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and G7.  And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy rich  and resource countries for western multinationals intact using color revolutions and local wars.  But as Napoleon quipped "You can do anything with bayonets, you just can't sit on them".

Conversion to neoliberal capitalism was a reaction on stagnation of industrial production and as such it was nurtured and encouraged by a series of government decisions for the last 50 years. Stagnation of industrial production made expansion of financial sector of paramount importance for the ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity Futures Modernization Act of 2000 is pretty telling in this respect.

There were also at least two important parallel developments.

Most respectable authors like Henry Giroux in his article in Counterpunch generally consider the term "casino capitalism" to be an equivalent to the term Neoliberalism. Here is a relevant quote from Henry Giroux's Authoritarian Politics in the Age of Casino Capitalism :

There is more at work here than simply a ramped up version of social Darwinism with its savagely cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii] there is also a full scale attack on the social contract, the welfare state, economic equality, and any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s ode to selfishness and self-interest is of particular importance because it offers a glimpse of a ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt, and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It destroys any viable notion of the and civic virtue in which the social contract and common good provide the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic responsibility. The idea of public service is viewed with disdain just as the work of individuals, social groups, and institutions that benefit the citizenry at large are held in contempt.

As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive lives, and money.”[iii]

But it does more by crushing any viable notion of the common good and public life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions, and values that constitute the public are now surrendered to powerful financial forces and viewed simply as another market to be commodified, privatized and surrendered to the demands of capital. With religious and market-driven zealots in charge, politics becomes an extension of war; greed and self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the work of Satan.

If the Republican candidacy race of 2012 is any indication, then political discourse in the United States has not only moved to the right—it has been introducing totalitarian values and ideals into the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing income and wealth inequality, and the further merging of the financial and military spheres in ways that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing markets from social constraints, fueling competitiveness, destroying education systems, producing atomized subjects, and loosening individuals from any sense of social responsibility prepare the populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the communities they inhabit.

Totalitarian temptations now saturate the media and larger culture in the language of austerity as political and economic orthodoxy. What we are witnessing in the United States is the normalization of a politics that exterminates not only the welfare state, and the truth, but all those others who bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people of color, and youth.

What too often goes unsaid, particularly with the media’s focus on inflammatory rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans, do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly, it appears these political elite choose to act in ways that sustain their dominance through the systemic reproduction of an iniquitous social order. In other words, big money and corporate power rule while electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional nature of our social order, while reinforcing a profound failure of political imagination. The issue should no longer be how to work within the current electoral system, but how to dismantle it and construct a new political landscape that is capable of making a claim on equity, justice, and democracy for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from responsibility.

The Obama administration has worked to extend the policies of the George W. Bush administration by legitimating a range of foreign and domestic policies that have shredded civil liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic tendencies at work in the United States will be dangerously intensified.

History

Casino capitalism can probably be more properly called financial corporatism. While the key idea of corporatism: that political actors are not individual people, but some associations and first of all corporations (which are officially considered to be "persons" and have rights) and trade unions, remains intact, financial corporatism is different from classic corporatism in several major ways:

Historically corporatism in various modifications became dominant social system after WWII and defeated "command socialism" as was implemented in the USSR. Here is an instructive review of corporatism history (The Economic System of Corporatism):

In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the radical solution of the abolition of private property. The result was called Corporatism. The name had nothing to do with the notion of a business corporation except that both words are derived from the Latin word for body, corpus.

The basic idea of corporatism is that the society and economy of a country should be organized into major interest groups (sometimes called corporations) and representatives of those interest groups settle any problems through negotiation and joint agreement. In contrast to a market economy which operates through competition a corporate economic works through collective bargaining. The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism. He would gather the parties to some dispute and say, "Let us reason together."

Under corporatism the labor force and management in an industry belong to an industrial organization. The representatives of labor and management settle wage issues through collective negotiation. While this was the theory in practice the corporatist states were largely ruled according to the dictates of the supreme leader.

One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function without direction or control by the state. The general culture heritage of Europe from the medieval era was opposed to individual self-interest and the free operation of markets. Markets and private property were acceptable only as long as social regulation took precedence over such sinful motivations as greed.

Coupled with the anti-market sentiments of the medieval culture there was the notion that the rulers of the state had a vital role in promoting social justice. Thus corporatism was formulated as a system that emphasized the positive role of the state in guaranteeing social justice and suppressing the moral and social chaos of the population pursuing their own individual self-interests. And above all else, as a political economic philosophy corporatism was flexible. It could tolerate private enterprise within limits and justify major projects of the state. Corporatism has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism, but it is in fact a separate, distinctive political economic system.

Although rulers have probably operated according to the principles of corporatism from time immemorial it was only in the early twentieth century that regimes began to identify themselves as corporatist. The table below gives some of those explicitly corporatist regimes.

Corporatist Regimes of the Early Twentieth Century
System Name Country Period Leader
National Corporatism Italy 1922-1945 Benito Mussolini
Country, Religion, Monarchy Spain 1923-1930 Miguel Primo de Rivera
National Socialism Germany 1933-1945 Adolph Hitler
National Syndicalism Spain 1936-1973 Francisco Franco
New State Portugal 1932-1968 Antonio Salazar
New State Brazil 1933-1945 Getulio Vargas
New Deal United States 1933-1945 Franklin Roosevelt
Third Hellenic Civilization Greece 1936-1941 Ioannis Metaxas
Justice Party Argentina 1943-1955 Juan Peron

In the above table several of the regimes were brutal, totalitarian dictatorships, usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist. In particular, the Roosevelt New Deal despite its many faults could not be described as fascist. But definitely the New Deal was corporatist. The architect for the initial New Deal program was General Hugh Johnson. Johnson had been the administrator of the military mobilization program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good job of managing the economy during that period and that is why he was given major responsibility for formulating an economic program to deal with the severe problems of the Depression. But between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.

It should be noted that many elements of the early New Deal were later declared unconstitutional and abandoned, but some elements such as the National Labor Relations Act which promoted unionization of the American labor force are still in effect. One part of the New Deal was the development of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority (TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make TVA a model for the creation of regional political units which would replace state governments. Their goal was not realized. The model for TVA was the river development schemes carried out in Spain in the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.

Corporatist regime typically promote large governmental projects such as TVA on the basis that they are too large to be funded by private enterprise. In Brazil the Vargas regime created many public enterprises such as in iron and steel production which it felt were needed but private enterprise declined to create. It also created an organized labor movement that came to control those public enterprises and turned them into overstaffed, inefficient drains on the public budget.

Although the above locates the origin of corporatism in 19th century France it roots can be traced much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development: Twentieth Century Brazil, says,

Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval social and legal structures, and into contemporary Catholic social philosophy. These ideas are based on the premise that man's nature can only be fulfilled within a political community.
..........
The central core of the corporatist vision is thus not the individual but the political community whose perfection allows the individual members to fulfill themselves and find happiness.
...............
The state in the corporatist tradition is thus clearly interventionist and powerful.

Corporatism is collectivist; it is a different version of collectivism than socialism but it is definitely collectivist. It places some importance on the fact that private property is not nationalized, but the control through regulation is just as real. It is de facto nationalization without being de jure nationalization.

Although Corporatism is not a familiar concept to the general public, most of the economies of the world are corporatist in nature. The categories of socialist and pure market economy are virtually empty. There are only corporatist economies of various flavors.

These flavors of corporatism include the social democratic regimes of Europe and the Americas, but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are now clearly corporatist in economic philosophy although not in name.

The concept of Quite Coup

The term "Quiet coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. From March 2007 through the end of August 2008, he was Chief Economist of the International Monetary Fund. The term was introduced in his article in Atlantic magazine, published in May 2009(The Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government

The wealth of financial sector gave it unprecedented opportunities of simply buying the political power iether directly or indirectly (via revolving door mechanism):

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The great wealth that the financial sector created and concentrated gave bankers enormous political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

He further researched this theme in his book 2010 book 13 Bankers The Wall Street Takeover and the Next Financial Meltdown  (ISBN 978-0307379054), coauthored with James Kwak. They also founded and regularly contributes to the economics blog The Baseline Scenario. See also History of Casino Capitalism

The net effect of the ideological counter-revolution based on market fundamentalism ideology was that it restored the power of financial oligarchy typical for Gilded Age. As Simon Johnson argues that was partially done by subverting regulators and that oversize institutions always disproportionately influence public policy:

The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.

Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the "efficiency costs" of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat industrial monopolies were not designed to address the problem we now face. The problem in the financial sector today is not that a given firm might have enough market share to influence prices; it is that one firm or a small set of interconnected firms, by failing, can bring down the economy. The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.

Caps on executive compensation, while redolent of populism, might help restore the political balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to the people who work there and to the government officials who were only too happy to bask in its reflected glory—has been the astounding amount of money that could be made. Limiting that money would reduce the allure of the financial sector and make it more like any other industry.

Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated. Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine.

Two Paths

To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important thing is to change them from time to time. If the U.S. were just another country, coming to the IMF with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.

Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When they get into trouble, they quite literally run out of money—or at least out of foreign currency, without which they cannot survive. They must make difficult decisions; ultimately, aggressive action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print. As a result, it could very well stumble along for years—as Japan did during its lost decade—never summoning the courage to do what it needs to do, and never really recovering. A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a sure thing right now. Certainly no one at the IMF can force it.

In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

It is pretty interesting to see how financial oligarchy filters information provided to the population to fit their biases. For example, the key facts about repeal of Glass-Steagall law  (BTW Joe Biden voted for it) mostly hidden from the public: 

Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous consent after Senator Gramm dominated the Senate debate...

"He was the architect, advocate and the most knowledgeable person in Congress on these topics," Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial crisis."

"The virtually unregulated over-the-counter market in credit-default swaps has played a significant role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.," Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.

But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for a change) initiatives in Heritage Foundation and other right-wing think tanks publications.

Stages of transformation

So what we are experiencing is a the completion of the transformation of one phase of capitalism to another. It happened in stages:

  1. Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from re-built Europe and Asian markets severely stressed the US manufacturing. due to competition return of capital dropped and in several industries became negative.
     

  2. Computers brought innovations into financial markets. They make possible real time trading of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent by financial institutions from the society.
     

  3. Globalization kicked in due to new opportunities offered by high speed global communications (Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the financial markets increased to the extent that they started to represent a different, new transnational phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth column) West went to significant length to protect them and their racket (Mikhail Khodorkovsky - Wikipedia,)
     

  4. Commercial banks turned into investment banks to exploit this opportunity.
     

  5. Financial sector completely corrupted academic science converting most economists to pay prostitutes which serve their interests.
     

  6. Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization of xUSSR space). Harvard Mafia (with some support from London) did the bidding of western banks in xUSSR space. As more becomes known about the laundering of Russian money in Western banks, many in the United States will likely try to hide behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that country's sorry conditions--with the Harvard Institute for International Development's Russia project (HIID) playing a major role (Harvard's 'Best and Brightest' Aided Russia's Economic Ruin ). Professor Jeffery Sacks provided a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality, prostitution, child poverty, and prominent role of organized crime.
     

  7. Banks became dominant political force on western societies with no real counterbalance from other parts of the elite. The first president completely subservient to banking elite was elected in the USA in 1992. Bill Clinton regime lasted eight years and along with economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they abolished the US pension system as it impede playing with population money and replaced in with widely inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities became just a den of bond traders looking for then next mark which give them the ability to put municipalities deeper in debt.

  8. Newly acquired political power of financial elite speeded the shift to bank "self-regulation" created huge shadow banking system which dwarf "official" under the smoke screen of "free-market" propaganda and PR from a coterie of corrupts academics (Chicago Scholl, Harvard Mafia, etc) . It engaged in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly acquired power financial elite remove all regulations that hamper their interests. Glass-Steagall was repealed at the last days of Clinton presidency, financial derivatives became unregulated.

  9. Deindustrialization kicked in. As financial speculation proved to be much more profitable to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing which first was limited to manufacturing jobs now extent its reach on IT and decimate previously profitable sector and its export potential.

  10. Externalities can no longer be suppressed and economics became unstable. Growth of inequality, job insecurity, as well as frequency of financial crises were natural consequences of financialization of the economy. They create huge imbalances, like bubble in residential real estate which was blown with the help and full support of the USA government as a way to overcome dot-com crisis consequences.

  11. Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis of enormous proportions. By their reckless policies and greed financial sector caused huge financial crisis of 2008 and now they are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest banks, the most corrupt institutions the world has ever known.

  12. Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption in western economies came under threat. Debt expansion which led to overconsumption within the western economies affected (or infected) by financialization. To sustain the current standard of living financial expansion became the necessity. It took the form of a competition for spheres of influence in the area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central banks play critical role in financing wars. After all Banks of England was created with this exact purpose.

I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more correctly the US brand of corporatism) was by-and-large complete.

In short we are living in a new politico-economic system in which financial capital won victory over both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling class and this fact is difficult to dispute. As a result. instead of the robber barons of the early 20th century (some of whom actually created/consolidated new industries), we have the top executives from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old aristocracy.

They are living off parasitic monopolization of access to any (physical, financial, intellectual, etc.) kind of property and gaining significant amount of profit without contribution to society (see Rentier capitalism which is a very fuzzy term for neoliberal model of capitalism).

Casino Capitalism as a result of stagnation of industrial manufacturing

Stagnation of industrial manufacturing droved up financial speculation as the method to compensate for falling rate on return on capital. This stagnation became prominent during Reagan administration (which started the major shift toward neoliberalism), although signs of it were present from early 60th.

For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries (66K people) were working in executive and managerial positions. Another 17% are in marketing, sales and processional specialty occupations (computer system analysts, PR specialists, writer and editors).

Those changes in the structure of employment had several consequences:

  1. The stagnation of the underlying economy meant that capitalists were increasingly dependent on the growth of finance to preserve and enlarge their money capital.
  2. The financial superstructure of the capitalist economy could not expand independently of its base -- underlying productive economy — hence the bursting of speculative bubbles became a recurrent and growing problem.
  3. Financialization could never overcome stagnation of industrial production. It is just an opium for rich, not a structural adjustment of the stagnation-prone economy. But like addition to narcotics does to human body it does tremendous damage to real economy.
  4. Rapid increase in inequality is necessary to sustain the appetites of the elite in the system with fixed size of the pie. Politico-economic conditions might became even more unfavorable for labor. Stagnation of industrial production mean shrinking pie, which necessitates redistribution of wealth in favor of a new, all-powerful financial Rentier class. This redistribution resulted in partial wipe-out of large swats of middle class. For the past three decades, America has steadily converted itself into a nation of haves (as Bush II quipped "This is an impressive crowd -- the haves and the have mores! Some people call you the elite -- I call you my base". ) and have-nots. The cost of a college education rises rapidly at a time when wages for skilled labor stagnate, so access to college became against discriminated in favor of upper class of the society. Repressive apparatus and ideological brainwashing are too strong to mount effective resistance.

The key to understanding of Casino Capitalism is that it was a series of government decisions (or rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate, by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency which it had vis-à-vis its main economic rivals and grab as large part of the world economic pie as it can. And this power grab was supported first of all by the role of dollar as currency in which oil is traded.

There might be some geo-strategically motives as well as the US elite in late 80th perceived that competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege) until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in the USA.

Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions. The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin" now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US government we mean US banks".

According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to solicit maximum contributions from employees and families. They might have been brought down to earth this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America, $2.1 million. Some think the long-term effect of such contributions to individual candidates was clear in the roll-call votes for the bailout.

Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was passed four days later, 263 to 171.

According to the article Fire Sale (The American Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are FIREmen. The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look at Senator Dodd's top donors for 2007-8 on openSecrets.org ) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep. Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage was done."

Casino Capitalism and Financial Instability

At the same time rise of financial capital dramatically increased instability. An oversized financial sector produces instability due to multiple positive feedback loops. In this sense we can talk about Financial Sector Induced Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation of the oversized financial sector negative influence of the economy. And in 2008 it did brought out economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression. Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality, the financial elite much like Bolsheviks elite, is having its own interests above the interests of the society.

As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism, and other inhibitions sometimes dumb down national debate". And the same statement is true for financial elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society became one giant Enron as money that are made from value addition in the form of manufacturing fade in significance to the volume of the money that is made from shuffling money around. In other was the Wall Street's locked USA in the situation from which there is no easy exit.

Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating creation of various debt instruments, interest of which at some point overwhelm the system carrying capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there is no good collateral against which lending freely was possible, even at high rates. This means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other words Ponzi economy of "saving and loans" is replaced with Madoff economy.

Whether you shift the resulting huge private debt to public to increase confidence or not, the net result is of this development of events is a crisis and a huge debt that society needs to take. Actually the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns and Lehman was only a start of consolidation of finances and we need to find something that replace financial sector dominance in the national economy. It would be nice is some technological breakthrough happened which would lift the country out of this deep hole.

See Financial Sector Induced Systemic Instability of Economy for more details.

Neoliberalism as the Ideology of Casino Capitalism

Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of Neoliberalism. The latter as an ideology and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable autocratic government which serves as channel of a wealth transfer from the public to a rentier elite. In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.

Addiction of the societies to disastrous politico-economical doctrines are similar to addictions to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better off adopting ideology of neoliberal capitalism; so it was revolution from above.  this abrupt switch created chaos in economics (which was applauded by Washington which under Clinton administration adopted the stance the Carnage needs to be destroyed and facilitated the process), criminal privatization of major industries, and pushed into object poverty the 99% of population of those countries. For some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal of Washington.

This also means that "society at large" did not had effective brakes to the assent of financial plutocracy (aka financial oligarchy).  I would add to this the computer revolution and internet that made many financial transaction qualitatively different and often dramatically cheaper that in previous history. Computers also enabled creation of new financial players like mutual funds (which created a shadow banking system with their bond funds) , hedge funds, exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.

From the historical view Reaganomics also can be considered to be the US flavor of Lysenkoism with economics instead of genetics as a target. Here is how Reaganomics is defined in Wikipedia

Reaganomics (a portmanteau of "Reagan" and "economics") refers to the economic policies promoted by United States President Ronald Reagan. The four pillars of Reagan's economic policy were to:[1]
  1. reduce the growth of government spending,
  2. reduce marginal tax rates on income from labor and capital,
  3. reduce government regulation of the economy,
  4. control the money supply to reduce inflation.

In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors.

Reagan became president during a period of high inflation and unemployment (commonly referred to as stagflation), which had largely abated by the time he left office.

Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded the role of state and government spending. The number two was applied by-and-large to top 1%. The number three means deregulation in the interests of financial oligarchy and dismantling all social program that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam, in the same sense as number one. As soon as financial institutions get in trouble, money are printed as if there is no tomorrow.

While the essence of Reagonomics was financial deregulation, the other important element was restoring the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms. In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to reverse the New Deal restrictions on financial sector and restore its dominance in the society.

Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority" as an important part of republican political base, which can be attracted to detrimental to its economic position policies by the smoke screen of false "moral" promises).

It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism opponents were purged and economic departments of the country were captured by principless careerists ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special breed of careerists rotated from Republican Party into Fed and other government structures. A classic example of compulsive careerists that were used by finance sector to promote its interests was Alan Greenspan.

One of the key ideas of Reaganomics was the rejection of the sound approach that there should be a balance between too much government regulation and too little and that government role is important for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS, Citi, AIG, are quite natural consequence of Reaganomics.

Reaganomics was a the US flavor of Lysenkoism with economics instead of generics as a target... It can and should be called Economic Lysenkoism.

The most interesting part of Reaganomics was that the power of this ideology made it possible to conditioned "working class" and middle class to act against their own economic interests. It helped to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed to achieve with working class of the USSR, but with much more resentment. This makes it in many ways very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way: "history repeats, first as a tragedy, then as farce).

Along with the term Reaganimics which implicitly stresses the deregulation, the other close term "market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview Institute):

Market Fundamentalism is the exaggerated faith that when markets are left to operate on their own, they can solve all economic and social problems. Market Fundamentalism has dominated public policy debates in the United States since the 1980's, serving to justify huge Federal tax cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the government’s civilian programs.

Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any pseudo-scientific theory with the term Lysenkoism. This holds true for both Market Fundamentalism (after all Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and hired guns from academia just do what powers that be expected) and, especially, Supply side economic. The political genius of those ideas is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

In this sense the Republican Party played the role very similar to the Communist Party of the USSR.

For example supply side economics was too bizarre and would never survive without explicit government support. This notion is supported by many influential observers. For example, in the following comment for Krugman article (Was the Great Depression a monetary phenomenon):

Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a political construct than based on sound economic theory. However, it would take a while before its toxic legacy is purged from the economics departments. Indeed, in some universities this might never happen.

Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases the societies were economically and ideologically bankrupt at the end.

Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy — and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants in industrialized countries. From this point of view this category of "state slaves" is generally more numerous that gulag inmates. Prison population also can be counted along those lines.

It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant privilege" of dollar status as the global fiat currency.

Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance, and real estate) and diminished role of other and first of all manufacturing industries. It was also accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph of the trader in assets over the long-term producer" in Martin Wolf's words.

Voodoo economic theories

Attempts of theoretical justification of Economic Lysenkoism fall into several major categories:

Those can be called pillars, cornerstones of Economic Lysenkoism. Each of the deserves as separate article (see links above).

Historically especially important was Chicago school of market fundamentalism promoted pseudo-scientific theories of Milton Freedman (Chicago School) as well as supply side economics.

Collapse of the USSR as ideological justification of Casino Capitalism superiority

The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it New Deal regulations were systematically destroyed. Dumped down variants of Nietzsche philosophy like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative" entrepreneur as a new Übermensch, which stands above morality.

"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good' men, Christians, and other nihilists ... When I whispered into the ears of some people that they were better off looking for a Cesare Borgia than a Parsifal, they did not believe their ears."[9] Safranski argues that the combination of ruthless warrior pride and artistic brilliance that defined the Italian Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of the modern Western middle class and its pseudo-Christian egalitarian value system.[10]

Brainwashing

The instability and volatility of active markets can devalue the economic base of real lives, or in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse and relying on the most ignorant part of the population as the political base (pretty much reminiscent of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks Dictatorship").

The "heroes" or transformation of US economy to casino capitalism model

While transformation to casino capitalism was an objective development, there were specific individuals who were instrumental in killing New Deal regulations. We would single out the following twelve figures:

  1. Ronald Reagan (although first steps toward casino capitalism were made under Carter).
  2. Milton Friedman
  3. Alan Greenspan
  4. Phil Gramm
  5. Robert Rubin
  6. Larry Summers
  7. Helicopter Ben
  8. Bush II
  9. Bill Clinton
  10. Sandy Weill
  11. Jeffrey Sachs with his "shock therapy" racket
  12. Martin Feldstein

There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to prosecute at least some of them.

In Bailout Nation (Chapter 19) Barry Ritholtz tried to rank major players that led country into the current abyss:

1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
10. Congress
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs
18. President George W. Bush
19. President Bill Clinton
20. President Ronald Reagan
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries Robert Rubin and Lawrence Summers
25. FOMC Chief Ben Bernanke
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
Supervision (OTS)
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk

Early Researchers of Casino Capitalism

Hyman Minsky

Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt. He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism of increasing fragility:

After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper power (American exceptionalism) and "end of history" where capitalism was supposed to reign supreme followed. But in 2000 the first moment to pay the piper arrives. It was postponed by Iraq war and housing bubble but reappeared in much more menacing form in 2008. It looks like in 2009 the USA arrived to the a classic Minsky moment with high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which threaten the very survival of our system and way of life.

The shift from speculative toward Ponzi finance was speed up by increased corruption of major players.

"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained, it encourages greater speculation and risk taking in borrowing and lending. Financial innovation makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods naturally lead to optimism, to booms, and to increasing fragility.

A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation, once started, is very difficult to stop. It may not end until balance sheets are largely purged of bad debts, at great loss in financial wealth to the creditors as well as the economy at large."

Susan Strange

For Strange the speed at which computerized financial markets work combined with new much larger size and their now, near-universal pervasiveness is an important qualitative change. One of the side effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are invested daily as foreign transactions. It is estimated that 98 per cent of these transactions are speculative. In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.

Notes:

Susan Strange (June 9, 1923 - October 25, 1998) was a British academic who was influential in the field of international political economy. Her most important publications include Casino Capitalism, Mad Money, States and Markets and The retreat of the State: The Diffusion of Power in the World Economy.

For a quarter of a century, Susan Strange was the most influential figure in British international studies. She held a number of key academic posts in Britain, Italy and Japan. From 1978 to 1988, she was Montague Burton Professor of International Relations at the London School of Economics and Political Science (LSE), the first woman to hold this chair and a professorial position in international relations at the LSE. She was a major figure in the professional associations of both Britain and the US: she was an instrumental founding member and first Treasurer of the British International Studies Association (BISA) [1] and the first female President of the International Studies Association (ISA) in 1995.

It was predominantly as a creative scholar and a forceful personality that she exercised her influence. She was almost single-handedly responsible for creating ‘international political economy’ and turning it into one of the two or three central fields within international studies in Britain, and she defended her creation with such robustness, and made such strong claims on its behalf, that her influence was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest and most influential campaigners for the closer integration of the study of international politics and international economics in the English language scholarship.

In the later period of her career, alongside the financial analyses offered in Casino Capitalism (the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad Money, Strange's contributions to the field include her characterisation of the four different areas (production, security, finance and knowledge) through which power might be exercised in International Relations. This understanding of what she termed "structural power", formed the basis of her argument against the theory of American Hegemonic Decline in the early eighties.

Her analysis particularly in States and Markets focused on what she called the ‘market-authority nexus’, the see-saw of power between the market and political authority. The overall argument of her work suggested that the global market had gained significant power relative to states since the 1970s. This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was emerging between territorially-bound nation states and weak or partial intergovernmental cooperation in which markets had a free hand which could be constructive or destructive.

John K. Galbraith

Among early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea that the major economic function of Governments is to strengthen countervailing powers to achieve some kind of balance between capital and labor. While unions are far from being perfect and his prediction did not materialize in view of sliding to corporatism it may well be that the renewed support of unions right efforts to organize could make a big contribution to a revised, post subprime/derivatives/shadow_banking crisis stage of capitalism.

His critique of Milton Freedman pseudoscience still has its value today.

As Joseph Stiglitz noted (CSMonitor, Dec 28, 2006):

...In many ways, Galbraith was a more critical observer of economic reality.

Driven to understand market realities

Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely needed reminder that all is not quite as perfect as the perfect market models – with their perfect competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's analysis depended.

Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as it was, with all the problems of unemployment and market power that simplistic models of competitive markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally flawed

... ... ...

In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929 – including the role of the stock market's speculative greed fed by (what would today be called) irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.

What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered markets often produce too much of some things, such as pollution, and too little of other things, such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect – that is, always – markets are inefficient; hence the need for government action.

Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing powers. He had the misfortune of articulating these ideas before the mathematical models of game theory were sufficiently developed to give them expression. The good news is that today, more attention is being devoted to developing models of these bargaining relationships, and to complex, dynamic models of economic fluctuations in which speculation may play a central role.

Government's role

While Friedman never really appreciated the limitations of the market, he was a forceful critic of government. Yet history shows that in every successful country, the government had played an important role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure. Galbraith made this case better than most.

Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending with advertising, political persuasion, and social pressures. It was because of his close touch with reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson years.

Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as it is theorized in simplistic models – has enhanced our understanding of the market economy. He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual life: Who will stand up against the economics establishment to articulate an economic vision that is both in touch with reality and comprehensible to ordinary citizens?

Galbraith was vindicated in his belief that the only economics possible is political economics and as government is always an agent of dominant class it always mixed with politics. Krugman and Stiglitz both have eaten humble pie, because according to neoclassical economics the crises should not have happened. Both should now reread Galbraith's The Great Crash: 1929 (see also extracts). BTW it is interesting that in 1996 Paul Krugman criticized limitations of Galbright vision in the following way:

To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation.

To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society.

The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would -- lacks this tragic sense. Galbraith's vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality.

Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to Economist's View blog) :

Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels by extravagant private car to picnic by a polluted river.

Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism: a reluctance to acknowledge that resources are scarce. In Galbraith’s scheme, said Herbert Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but they were not the right questions.”

Soros contribution to the understanding of growth of financial sector as source of new, global economic instability

This idea of "casino capitalism" as a driver of financial instability was developed further in the book The Crisis of Global Capitalism by George Soros (1998), who highlights the potential for disequilibrium in the financial system, and the inability of non-market sectors to regulate markets.

Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated with such candor and accuracy that the book made a significant impact. The following is a sampling of Soros' insights.
  1. Unregulated financial markets are inherently unstable. Soros observes that, contrary to conventional economic theory, financial markets are not driven toward a relatively stable and rational price by the objective value assessment of such things as the soundness of a company's management, products, or record of profitability. Rather they are constantly driven away from equilibrium by the momentum of self-fulfilling expectations -- a rising stock price attracts buyers who further raise the price-to the point of collapse. The recent massive inflation and subsequent collapse in the price of the shares of unprofitable dot-com companies illustrates Soros' point.

    Bank lending also contributes to the instability, because the price of real and financial assets is set in part by their collateral value. The higher their market price rises the larger the loans banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value of the assets plummets below the amount of the money borrowed against them. This forces banks to call their loans and cut back on the lending, which depresses asset prices and dries up the money supply. The economy then tanks-until credit worthiness is restored and a new boom phase begins.

  2. Financial markets are amoral by definition. Following Napoleon Bonaparte, Soros stressed that there is no meaningful place for individual moral behavior in the context of financial markets, because such behavior has no consequence other than to reduce the financial return to the ethical actor.

    When I bought shares in Lockheed and Northrop after the managements were indicted for bribery, I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England was on the other side of my transactions, and I was in effect taking money out of the pockets of British taxpayers. But if I had tried to take social consequences into account, it would have thrown off my risk-reward calculation, and my profits would have been reduced.

    Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and Britain would have devalued sterling no matter what he did. "Bringing my social conscience into the decision-making process would make no difference in the real world; but it may adversely affect my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral, but his basic argument is accurate. His understanding that it is futile to look to individual morality as the solution to the excesses of financial markets is all too accurate.

  3. Corporate employees are duty-bound to serve only corporate financial interests. Soros writes:

    Publicly owned companies are single-purpose organizations-their purpose is to make money. The tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned and upright citizens, but their room for maneuver is strictly circumscribed by the position they occupy. They are duty-bound to uphold the interests of the company. If they think that cigarettes are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they ought to quit their jobs. Their place will be taken by people who are willing to carry on.

    Though not specifically mentioned by Soros, this is why corporations were in the past (at least partially) excluded from the political processes (although it was never complete and it is well known fact that Crusades and Siege of Constantinople (1204) were financed by Genoese bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the society can define their goals and the rules of the marketplace. They are incapable of distinguishing between private corporate interests and broader public interests. But that changed with the global dominance of corporatism.

  4. Financial markets are oblivious to externalities and are infected by "short-termism". Specifically the fact that a strategy or policy produces economic returns in the short-term does not mean the long-term results will be beneficial. The focus of financial markets is on short-term individual gain to the exclusion of both social and longer-term consequences. The fact that particular policies and strategies are effective in producing short-term financial returns does not mean they are more generally beneficial or desirable. Soros offers the example that running up a budget or trade deficit "feels good while it lasts, but there can be hell to pay later."

  5. The relationship between the center and the periphery of the capitalist system is profoundly unequal. The powerful countries at the center of the capitalist system are both wealthier and more stable than countries at the periphery because control of the financial system and ownership of productive assets allows them to shape economic and political affairs to their benefit.

    "Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the development of democratic institutions. The international flow of capital is subject to catastrophic interruptions."

    In times of uncertainty financial capital tends to return to its country of origin, thus depriving countries at the periphery of the financial liquidity necessary to the function of monetized economies. "The center's most important feature is that it controls its own economic policies and holds in its hands the economic destinies of periphery countries."

  6. In the capitalist system greed (aka "monetary values") tend to displace social values in sectors where this is destructive of important public interests. Soros writes:

    Monetary values have usurped the role of intrinsic values, and markets have come to dominate spheres of existence where they do not properly belong. Law and medicine, politics, education, science, the arts, even personal relations-achievements or qualities that ought to be valued for their own sake are converted into monetary terms; they are judged by the money they fetch rather than their intrinsic value."

    Because financial "capital is free to go where most rewarded, countries vie to attract and retain capital, and if they are to succeed they must give precedence to the requirements of international capital over other social objectives.

Ha-Joon Chang

One notable later researcher of casino capitalism, especially "free market" fundamentalism propaganda Cambridge University researcher Ha-Joon Chang. In 2011 he published a fascinating book 23 Things They Don't Tell You About Capitalism. Here are two Amazon reviews that shed some light at the key ideas of the book:

William Podmore

Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans. Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.

Chang takes on the free-marketers' dogmas and proposes ideas like

He notes that the USA does not have the world's highest living standard. Norway, Luxemburg, Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland, Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the highest industrial output per person.

Free-market politicians, economists and media have pushed policies of de-regulation and pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more frequent crises. Britain's growth rate in income per person per year was 2.4 per cent in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009, and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.

So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'. Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment as a share of national output, in all the G7 countries.

Chang shows how free trade is not the way to grow and points out that the USA was the world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s, and that Britain was one of world's the most protectionist countries during its rise, from the 1720s to the 1850s.

He shows how immigration controls keep First World wages up; they determine wages more than any other factor. Weakening those controls, as the EU demands, lowers wages.

He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead, we need controls capital, on mergers and acquisitions, and on financial products. We need the welfare state, industrial policy, and huge investment in industry, infrastructure, worker training and R&D.

As Chang points out, "Even though financial investments can drive growth for a while, such growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term investments in real sector activities, as so vividly shown by the 2008 financial crisis."

This book is a commonsense, evidence-based approach to economic life, which we should urge all our friends and colleagues to read.

Loyd E. Eskildson

The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis, but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.' Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism." Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics professor at the University of Cambridge, is no enemy of capitalism, though he contends its current conservative version should be made better. Conventional wisdom tells us that left alone, markets produce the most efficient and just outcomes - 'efficient' because businesses and individuals know best how to utilize their resources, and 'just' because they are rewarded according to their productivity. Following this advice, countries have deregulated businesses, reduced taxes and welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised - slower growth and rising inequality, often masked by rising credit expansion and increased working hours. Alternatively, developing Asian countries that grew fast did so following a different version of capitalism, though to be fair China's version to-date has also produced much greater inequality. The following summarizes some of Chang's points:

  1. "There is no such thing as a free market" - we already have hygiene standards in restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008, the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by President Bush on the grounds that it was a necessary state intervention consistent with free-market capitalism. Chang's conclusion - free-marketers contending that a certain regulation should not be introduced because it would restrict market freedom are simply expressing political opinions, not economic facts or laws.
  2. "Companies should not be run in the interest of their owners." Shareholders are the most mobile of corporate stakeholders, often holding ownership for but a fraction of a second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate strategies that maximize short-term profits and dividends, usually at the cost of long-term investments. (This often also includes added leverage and risk, and reliance on socializing risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate limited liability, while a boon to capital accumulation and technological progress, when combined with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison, Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional managers to maximize their own prestige via sales growth and prestige projects instead of maximizing profits. Another negative long-term outcome driven by shareholders is increased share buybacks (less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale layoffs from off-shoring. Governments of other countries encourage longer-term thinking by holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater worker representation (Germany's supervisory boards), and cross-shareholding among friendly companies (Japan's Toyota and its suppliers).
  3. "Free-market policies rarely make poor countries rich." With a few exceptions, all of today's rich countries, including Britain and the U.S., reached that status through protectionism, subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite, not because of, protectionism. The problem with that explanation is the number of other nations paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany, Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong, Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang believes the 'official historians' of capitalism have been very successful re-writing its history, akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He also points out that developing nations that stick to their Ricardian 'comparative advantage,' per the conservatives prescription, condemn themselves to their economic status quo.
  4. "We do not live in a post-industrial age." Most of the fall in manufacturing's share of total output is not due to a fall in the quantity of manufactured goods, but due to the fall in their prices relative to those for services, caused by their faster productivity growth. A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing nations to skip manufacturing and go directly to providing services forget that many services mainly serve manufacturing firms (finance, R&D, design), and that since services are harder to export, such an approach will create balance-of-payment problems. (Chang's preceding points directly contradict David Ricardo's law of comparative advantage - a fundamental free market precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite lacking experienced managers and natural resources, is another.)
  5. "The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S. in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides the best economic model. (This is already occurring - the World Bank's chief economist, Justin Lin, comes from China.)
  6. "Governments can pick winners." Chang cites examples of how the Korean government built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG), despite lacking raw materials or experience for those sectors. True, major government failures have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed - e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland, France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite well with government-picked winners. Another problem is that business and national interests sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest of maintaining full employment. (However, greater unbiased U.S. government involvement would be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations - $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve at the beginning of the Great Recession. Government planning allows minimizing excess capacity, maximizing learning-curve economies and economies of scale and scope; operational performance is enhanced by also forcing government-owned or supported firms into international competition. Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials, building infrastructure) are necessary for emerging economies to move into more sophisticated sectors.
  7. "Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics is based on the belief that the poor maximize current consumption, while the rich, left to themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3% in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
  8. "U.S. managers are over-priced." First, relative to their predecessors (about 10X those in the 1960s; now 300-400X the average worker), despite the latter having run companies more successfully, in relative terms. Second, compared to counterparts in other rich countries - up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase, world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial and Commercial Bank of China, the world's largest, being paid $234,700. Read more ›

Willem Buiter and the idea of long term after crisis stagnation

Willem Buiter in his FT article After the Crisis Macro Imbalance, Credibility and Reserve-Currency suggested that after financial crisis of 2008 there might be very long a painful deleveraging period aka secular stagnation. In short each financial crisis make recovery longer and longer. That's why the US will most likely face a long period of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:

Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer the required period of digestion. This explains for the paradox of trying to stimulate consumption when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption. A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately searches a new bubble to invest in. "

... ... ...

The roots of the crisis are major international macroeconomic imbalances. Despite the fact that the excesses of the financial system were instrumental to lead these imbalances further than otherwise possible, insufficient regulation should not be viewed as the main factor behind the crisis. The expenditure of central countries, spinned by all sort of financial innovations created by a globalized financial system, was the engine of world growth. When debt became clearly excessive in central countries and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy. With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist. The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even if successful, the economies of the US and the other central countries, given the burden of excessive debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption of troubled assets by the public sector, in order to avoid the collapse of the financial system, might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated effort to increase public expenditure is successful, the central economies will remain stagnant for as long as the excessive indebtedness of the private sector persists. The period of digestion of excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute to the recovery of internal demand, the temptation to central economies to also adopt a protectionist stance will be strong.

Willem Buiter also defined ‘cognitive regulatory capture’ which existed during the Greenspan years and when the Fed were just an arm of Wall Street.

This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and financial sector concerns and fears and in an overestimation of the strength of the link between financial market turmoil and financial sector deleveraging and capital losses on the one hand, and the stability and prosperity of the wider economy on the other hand. The paper gives five examples of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory capture. The abstract of the paper follows next. The latest version of the entire enchilada can be found here. Future revisions will also be found there.

Joseph Stiglitz on 5 steps to Casino Capitalism

In his 2008 Vanity Fair article Capitalist Fools Stiglitz identifies five key steps in transformation of American capitalism to Casino Capitalism (moments of failure as he called them):

No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:

Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.

snip

If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.

Greenspan presided over not one but two financial bubbles.

  1. Congress repealed the Glass-Steagall Act in 1999 under Bill Clinton (Glass-Steagall was a depression-era reform that separated commercial and investment banks)

I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s "self interest rightly understood."

Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process."

Once more, it was deregulation run amuck, and few even noticed.

  1. The Bush tax cuts, both on income and capital gains

The Bush administration was providing an open invitation to excessive borrowing and lending—not that American consumers needed any more encouragement.

  1. Faking the Numbers

Here he refers to bad accounting, the failure to address problems with stock options, and the incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic assets.

  1. Paulson and the Flawed Bailout

Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.

Stiglitz concludes:

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day. Ideas have consequences, especially when we stop empirically testing them. Republican economics have created great pain to America and harmed our national interest.

The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:

As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest — toward short-term self-interest

Yes, for all their claims to science, the premise conflicts with tendencies of people.

This is the real legacy of Ronald Reagan and Alan Greenspan:

The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class households to for-profit corporations and the richest 1% of the population. It created an unprecedented wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class without which democracy can’t survive.

Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."

 Conclusions: From Animal Farm To Animal House

Instead of conclusion I will reproduce the post from Sudden Debt (March 17, 2008):

In Orwell's Animal Farm all animals are equal - except that some are more equal than others. All in the spirit of law, order and the proper functioning of society, of course. Fittingly, the animals that have chosen this role by themselves and for themselves, are the pigs.

Cut to US financial markets today. After years of swinish behavior more reminiscent of Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it wasn't enough that they devoured all the "free market" food available and inundated the world with their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they are more equal than others.

But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all that farms function best when animals are free to do as they please, guided solely by invisible hooves. No regulation, no oversight, no common sense. Oh yes, and pigs fly..

So what is to be done now? Two things:

In other words, the focus from now on should be on adding value by means of work and savings (capital formation), instead of inflating assets and borrowing.

Furthermore, we should realize that in a world already inhabited by close to 7 billion people and beset by resource depletion and environmental degradation, defending growth for growth's sake is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder on the accelerator is not going to make it go any faster and will likely result in a fatal crash.

Debt, and finance in general, should be left to re-size downwards to a level that better reflects the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative" in the worst interpretation of the words: they are designed to artificially maintain debt at levels that myopically projects growth as far as the eye can see.

What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value. What scares me, though, is the statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility and margin of error that's appropriate given the speed at which the transaction came together", he said.

If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets to buy one of the largest investment banks in the world, where should all other financial firms be trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding into a vacuum?


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[Dec 02, 2016] Trumpism as bastard neoliberalism

Notable quotes:
"... It might well be a mistake to see neoliberalism and Trumpism (and Brexiteerism, and their international cousins) as sharply opposed. ..."
"... The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. ..."
"... Trump's neoliberalism is definitely "neoliberalism without globalization and offshoring of domestic manufacturing". ..."
"... He also reject neoliberal interventionism, which was the main reason people voted against Hillary with her crazy jingoism and attempts to outdo Senator McCain in anti Russian rhetoric. ..."
"... But still Trump's "bastard neoliberalism" is a pretty questionable political and economic platform, as you can't be half-pregnant. On the other hand the return to New Deal capitalism is hardly possible. So somebody needs to find an alternative that works. That's might spell troubles for Trump. Or may be not: in a way this looks similar to Stalin's rejection of Trotsky idea of global proletarian revolution and put forward his idea of "Socialism in a single country" ..."
"... I think Trump platform might be viewed as "Neoliberalism in a single country". ..."
"... BTW Trump rejection of neoliberalism goes belong globalization and includes some forms of privatization. For example, Trump used to be against privatizing Medicare - a part of the platform of Republicans in Congress ..."
Dec 02, 2016 | crookedtimber.org

engels 11.29.16 at 1:41 am 4

It might well be a mistake to see neoliberalism and Trumpism (and Brexiteerism, and their international cousins) as sharply opposed. An alternative analysis (which I don't necessarily endorse every word of but found thought-provoking):

The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.]

http://www.nakedcapitalism.com/2016/11/trumpism-has-dealt-a-mortal-blow-to-orthodox-economics-and-social-science.html

likbez 11.30.16 at 1:36 am 58

@4
engels 11.29.16 at 1:41 am

I agree that Trumpism is a complicated phenomena, but the idea that

Trumpism = "bastard neoliberalism"

, while definitely a huge simplification, looks attractive to me, because it catches internal contradictions in Trump's political and economic views. Trump's neoliberalism is definitely "neoliberalism without globalization and offshoring of domestic manufacturing".

He also reject neoliberal interventionism, which was the main reason people voted against Hillary with her crazy jingoism and attempts to outdo Senator McCain in anti Russian rhetoric.

But still Trump's "bastard neoliberalism" is a pretty questionable political and economic platform, as you can't be half-pregnant. On the other hand the return to New Deal capitalism is hardly possible. So somebody needs to find an alternative that works. That's might spell troubles for Trump. Or may be not: in a way this looks similar to Stalin's rejection of Trotsky idea of global proletarian revolution and put forward his idea of "Socialism in a single country"

I think Trump platform might be viewed as "Neoliberalism in a single country".

BTW Trump rejection of neoliberalism goes belong globalization and includes some forms of privatization. For example, Trump used to be against privatizing Medicare - a part of the platform of Republicans in Congress (the following quote from Trump book was taken verbatum from Amazon customer review
https://www.amazon.com/gp/customer-reviews/R2RP80CXZGIJ9W/ref=cm_cr_arp_d_rvw_ttl?ie=UTF8&ASIN=1621574954 )

"It's not unreasonable for people who paid into a system for decades to expect to get their money's worth - that's not an "entitlement," that's honoring a deal. We as a society must also make an ironclad commitment to providing a safety net for those who can't make one for themselves."

This view is also not compatible with classic neoliberalism.

[Dec 02, 2016] The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more win-lose rather than potentially win-win

Notable quotes:
"... The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'. ..."
Dec 02, 2016 | crookedtimber.org

derrida derider 11.29.16 at 2:09 am 5

T's right – the economic impact of Brexit on the UK will overwhelmingly depend on how the EU "passport" entitlements for the banks are negotiated. And of course the Germans (with Frankfurt) and the French (with Paris) have a strong incentive to make sure that a good slab of the City's business goes to them.

The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'.

I think the result will certainly be lower aggregate GDP for the UK but it might well be better distributed (eg London property prices may be less absurd). The City has long made the rest of the UK economy suffer from a form of Dutch disease through an overvalued pound sterling. So those Sunderland Brexit voters might prove ultimately correct in their assessment of their economic interests – just not in the way they think.

[Dec 02, 2016] Neoliberalism may be a smoking ruin intellectually, but it remains the default ideology today across most of the political spectrum, for lack of an articulated alternative

Notable quotes:
"... Neoliberalism marches on in the centre-left critique of Brexit: Brexit's political motivation is a racist nationalism, there is no good or practical alternative to the EU and its four freedoms of unmanaged movements of capital, people, goods. ..."
"... The essence of left neoliberalism was the collaboration of the educated, credentialed managerial classes in the plutocratic project and the abandonment of the cause of defending what used to be called the working classes and the poor from predatory capital. ..."
"... the neoliberal trap in which what passes for left politics ..."
"... Brexit may never happen or its management may be taken over by other hands in a further reversal of political fortune on one side or the other of the Channel. A Eurozone collapse can scarcely be ruled out as Italy crumbles and France chooses between a proud neoliberal unaware of that collapse thingee and a right-wing of the old school. That would create opportunities I can scarcely imagine; there might be an alternative after all. ..."
"... [I]inequality is deadly for democracy, and for the equal political status of citizens. Because the power and influence high earners derive from their income threatens such status equality, there is a strong public interest in constraining it, even if doing so raises no money at all ..."
"... "Chauvinism" is a good thought, but you can see the problem. You read all manner of implications into "tribalism" that I don't see at all, but want to read fifty years or so of usage out of "chauvinism". ..."
"... Well neo-liberalism worked for some. Guess you had to be in early enough. I wonder if Paris or Frankfurt will allow its banking jobs to be outsourced to India? ..."
Dec 02, 2016 | crookedtimber.org

David 11.29.16 at 12:08 pm 19

I think there's a real risk of confusing two things: on the one hand, ideology, on the other a mechanism for mobilizing political and electoral support.
Neoliberalism may be a smoking ruin intellectually, but it remains the default ideology today across most of the political spectrum, for lack of an articulated alternative. But it's not a good way to mobilize electoral support ("vote for me and I'll outsource your job to India"). Historically, that mobilizing role was played by divisions of wealth and power, but with the end of class politics, the only obvious alternative is tribalism, or whatever we want to call it, with it's message "I represent your group interests, vote for me." On the "right" this manifests itself through the tribalism of tradition, language, culture etc; on the "left" through the tribalism of identity politics. You can't really construct functioning political parties around purely abstract ideas (tolerance, for example) – you need voters. This was perfectly well demonstrated by the Clinton election campaign, where the ideology was neoliberal, but the mobilizing device was tribalism ("you are X therefore you should vote for me").

Much of the confusion in contemporary politics, therefore, results from competitive attempts to foist tribal identities on people, and the resistance of potential voters to this tactic. Now, traditional mobilizing factors did have the virtue of clarity; you were objectively poor, unemployed, property-owning, share-owning or whatever, and it was fairly obvious what the consequences of voting for this or that party would be. In the new dispensation, the "right" is doing better at this game at the moment than the "left" because its tribal markers (language, history, nation etc.), whilst not uncontested or unproblematic, mean more to people than the race and gender-based markers of the "left". Someone with black skin may not feel that that defines the way they should vote, in preference to say, their economic interests. This is why in France, for example, the Socialists have effectively lost an increasingly prosperous and predominantly socially conservative immigrant vote to the Right.

Likbez@5

"Brexit is just a symptom of growing resistance to neoliberalism, and the loss of power of neoliberal propaganda."

Broadly agree. After all, neoliberalism (and its child, globalization) was created and is enforced by nations, and its destruction, if that happens, must begin at the national level. My own, totally unrealistic, hope is that if Brexit looks like happening and similar things follow elsewhere, the EU will be frightened enough that some of the neoliberal poison will seep out, and Europe will go back to being what it was, and always should have been. Some hope.

Peter K. 11.29.16 at 3:22 pm 33 ( 33 )

What about Dean Baker's speculation?

http://cepr.net/blogs/beat-the-press/the-end-of-austerity-a-brexit-dividend

"Apparently, the conservative government has now abandoned its plans for further austerity and a balanced budget. It is expected to spend an additional $187 billion over the next five years (roughly 1.0 percent of GDP) to boost the economy and create jobs. According to the NYT, this spending is a direct response to concerns over the plight of working class people who voted for Brexit in large numbers.

This outcome is worth noting, because the boost to the economy from additional spending is likely to be larger than any drag on growth as a result of leaving the European Union. This would mean that the net effect of Brexit on growth would be positive. Of course the UK government could have abandoned its austerity path without Brexit, but probably would not have done so. Given the political context, working class voters who wanted to see more jobs and a stronger welfare state likely made the right vote by supporting Brexit. This doesn't excuse the racist sentiments that motivated many Brexit supporters, but it is important to recognize the economic story here.

There is a deeper lesson in this story. The elites that derided Brexit were largely content with austerity policies that needlessly kept workers from getting jobs and also weakened the welfare state. Many were willing to push nonsense economic projections of recession in order to advance their political agenda. In this context, it is not surprising that large numbers of working class people would reject their argument that Brexit would be bad for the UK."

WLGR 11.29.16 at 5:06 pm 36

Rather than rehash my objections to "tribalism" as far as the racialized and imperialist connotations of the term itself, drawing off of likbez @ 6 and the recent sociobiology/evopsych thread, here's another objection: to the extent that it relies on a vague idea of modern far-right nationalism as just a modern manifestation of some deeper general human tendency toward ingroup/outgroup moral reasoning, it goes much too far in naturalizing far-right nationalism, making it out to be a core aspect of immutable human nature instead of the historically contingent political and economic phenomenon it is. (Cf. Kevin Drum's misapprehension of the term "white supremacy" , which doesn't refer to any abstract idea that white people are or should be superior, but the historical reality of their tangible efforts to create and maintain a superior material position.) On a certain level fascists are fascists because they perceive the subjugation of other races and nationalities to be in their interest based on their understanding of how global capitalist society works, and in some sense their understanding of the subjugation and domination necessary for capitalism to function is much clearer than the understanding of a proverbial "bleeding-heart liberal".

Accordingly, the ideological implication of "tribalism" that the guards at Auschwitz were doing fundamentally the same thing as the chimpanzees in 2001: A Space Odyssey , resembles what some old bearded leftist once described as an effort "to present production as encased in eternal natural laws independent of history, at which opportunity bourgeois relations are then quietly smuggled in as the inviolable natural laws on which society in the abstract is founded". No, fascism isn't inevitable, or at least it's only inevitable as long as capitalism is too.

WLGR 11.29.16 at 7:24 pm ( 45 )

JQ: "I don't know how I could have been clearer that the current upsurge of tribalism is a historically contingent political and economic phenomenon arising from the collapse of neoliberalism."

Saying "the current upsurge of tribalism" isn't the same thing as saying "tribalism". The implication of the former is that tribalism has been here all along under the surface and our modern historical moment isn't creating it so much as uncovering it, with the "it" in question implied to be something premodern and primitive to which we're returning or even regressing. At best it's a vague and partial metaphor that needs to be closely monitored to avoid implying any deeper comparison, and if it's intended in any way as a pejorative, it works via our perception of something inherently wrong or even evil about "primitive" modes of social existence, something that demands a unilateral civilizing intervention by the enlightened imperialists of the mind. If you're really searching for a proper response to "tribalism", the ideology embedded in the term "tribalism" seems to itself imply the very same kind of paternalist liberal response you otherwise seem to rightly abhor.

Here's a thought: why not "chauvinism"? Just because in recent years it's widely become shorthand for "male chauvinism", don't forget it was originally coined for excessive and potentially bigoted nationalism, after a (likely apocryphal) Napoleonic-era French soldier named Nicolas Chauvin. As far as historical allusions for a tendency claimed to encompass everyone from Hitler to George Wallace to Donald Trump, using a word derived from the dictatorial personality-cultish nationalist reaction to the first true modern universalist revolution seems to be on solid ground, especially compared to a word that implies continuity between racist oppression in modern nation-states and the alleged backward savagery of the very populations being oppressed.

John Quiggin 11.29.16 at 7:41 pm

"Chauvinism" is a good thought, but you can see the problem. You read all manner of implications into "tribalism" that I don't see at all, but want to read fifty years or so of usage out of "chauvinism".

Trying Google, I find that just about all the top hits for "tribalism" are in the sense I use, and nearly all of the top hits for "chauvinism" are associated with male chauvinism, even in some dictionary definitions.

bruce wilder 11.29.16 at 7:46 pm ( 47 )

Brexit has not been defined in any detail, so calling for speculation is inviting any and all kinds of counterfactual speculative projection. That may be interesting, to the extent it reveals worldview or even more theoretical presupposition. But, what I get from the OP and many of the comments is that neoliberalism has not collapsed at all.

Neoliberalism marches on in the centre-left critique of Brexit: Brexit's political motivation is a racist nationalism, there is no good or practical alternative to the EU and its four freedoms of unmanaged movements of capital, people, goods.

The great difficulty of renegotiating the Gordian knot of regulation tying the EU together looms large, as it would for the socio-economic class of people tasked with creating and recreating these sorts of systems, systems of finance, administrative process and supply chain that loom so large in our globalised economy - pay no attention to the sclerosis, please! How will we get visas?!?

The deep and persistent poverty that scars England and the struggles of local displacement that shadow the fantastic globalised wealth imported into the core of the Great Metropolis are mentioned by a few commenters as a dissent (my interpretation, alternative welcome). There is in this leftish discussion little skepticism expressed about how healthy it is that the UK is so invested in global and European finance. What is engaged is scorn for the idea of a Tory social conscience. (I have never seen one myself.) But what goes unmentioned is the absence of a Left economic conscience.

Which brings me back around to question the ostensible premise of the OP, the alleged collapse of neoliberalism. What has collapsed politically - as any reader of news headlines must surely know - is the social democratic left. (USA, France, Italy at any moment)

The essence of left neoliberalism was the collaboration of the educated, credentialed managerial classes in the plutocratic project and the abandonment of the cause of defending what used to be called the working classes and the poor from predatory capital. I do not yet see the left critique of Brexit departing from either the collaboration or the abandonment. In British politics, the continuing civil war in the Labour Party between the old leftists and the new membership on the one hand and the Blairite careerists in the PLP and their supporters among the cosmopolitans would seem to furnish a stark illustration of how disabled the left is at this juncture, mere spectators as a weak Tory Party bungles its way forward unimpeded.

Mumbling about "tribalism" says more about the neoliberal trap in which what passes for left politics appears fatally trapped than it does about right populism.

Sure, we want to shout "fascism" but if this is the second coming of that incoherent political tendency, it is even more farce than it was the first time around.

This very weak tea populism that is Trump or May's one nation conservatism redux is only possible, imho, because there is no left populism to compete credibly for those "working class" constituencies, whose political worldviews and attitudes are - shall we say, unsophisticated? Rather than compete for the loyalty of those authoritarian followers (to use a term from political psychology), the left organizes its own form of "tribal" identity politics around scorning them as a morally alien out-group. And, the new (alt?) right leverages the evidence of class contempt and so on for their own populist mobilization.

This right is not very credible as populists, but it is a matter of out running a bear in the woods – the bear is the loss of elite legitimacy – and it has only been necessary to outrun the left, which so far will not even tie its shoes.

Brexit may never happen or its management may be taken over by other hands in a further reversal of political fortune on one side or the other of the Channel. A Eurozone collapse can scarcely be ruled out as Italy crumbles and France chooses between a proud neoliberal unaware of that collapse thingee and a right-wing of the old school. That would create opportunities I can scarcely imagine; there might be an alternative after all.

SamChevre 11.29.16 at 9:42 pm

Discussions of Brexit, and its economic effects, continues to remind me of this Chris Bertram post from 2014.

[I]inequality is deadly for democracy, and for the equal political status of citizens. Because the power and influence high earners derive from their income threatens such status equality, there is a strong public interest in constraining it, even if doing so raises no money at all .[W]e need to shift the balance of voice in favour of the unemployed teenager and against the City trader.

Hidari 11.29.16 at 9:44 pm ( 51 )

@47

Maybe not just the social democratic left. Maybe the whole left. This whole capitalist experiment is so new, historically speaking (in its industrialised form only going back a few centuries) we simply have no idea how it will play out long-term. Maybe what we have known as 'the left' was simply a 'reactive formation' to initial stages of capitalism, facilitated by wars and the early,' factory' model of capitalism. Maybe in our 'post-modern' era of capitalism (which might, after all, last for centuries), with low unionisation, high unemployment/underemployment, massive income inequality, slow growth, and a 'bread and circuses' media, the left simply no longer has any political role.

After all, the collapse of the social democratic left follows in the wake of the collapse of the radical left in the 1980s and 1990s, which (despite occasional 'dead cat bounces' as we have seen in Greece and Spain) shows no sign of returning. And the centre (e.g. the LibDems in the UK) died a long time ago.

As Owen Jones has been amongst the few to point out perhaps the future of Europe lies in Poland where the left and centre have simply ceased to exist, and all of political life consists of neo-Thatcherites fighting ethno-nationalists for a slice of the political pie.

Helen 11.29.16 at 10:07 pm

"Chauvinism" is a good thought, but you can see the problem. You read all manner of implications into "tribalism" that I don't see at all, but want to read fifty years or so of usage out of "chauvinism".

Trying Google, I find that just about all the top hits for "tribalism" are in the sense I use, and nearly all of the top hits for "chauvinism" are associated with male chauvinism, even in some dictionary definitions.

Ethnocentrism?

T 11.29.16 at 10:28 pm ( 53 )

@35 Engels & JQ

Well neo-liberalism worked for some. Guess you had to be in early enough. I wonder if Paris or Frankfurt will allow its banking jobs to be outsourced to India?

In the US, the pres-elect has just nominated a health secretary who is for killing Obamacare while Trump's party is talking about privatizing (thereby killing) Medicare. So much for the complete death of neo-liberlism JQ. There's always time for one final looting.

WLGR 11.29.16 at 10:30 pm

Point taken, although if we're taking our intellectual cues from mainstream definitions now, someone should notify the laypeople confused about non-mainstream scholarly definitions of words like "liberalism" and "racism" that they were actually right all along. From my understanding, the typical scholarly view of "tribe" as a concept ranges from vague and essentialist on one end (cf. "feudalism") to a racism-tinged pejorative on the other end (cf. "savage"), and in neither case is it considered particularly respectable to deliberately orient a theory of human society around the distinction between what is or isn't "tribal".

But if you're not necessarily convinced that the term "tribalism" is offensive in itself, another line of attack might resemble this :

The instinct to explain the seemingly inexplicable rise of Trump by blaming a foreign influence–or likening it to something from non-white or Slavic countries–is as lazy as it is subtly racist. Trump is Trump. Trump is American. His bigotry, his xenophobia, his sexism, his contempt for the media, his desire to round up undesirables, all have American origins and American explanations. They don't need to be "like" anything else. They are like us. While acknowledging this may be uncomfortable, doing so would go a lot further in combating Trump than treating him as anomalous or comparable only to those poor, backwards foreigners.

In other words, even if we assume there's nothing inherently problematic about calling groups like the Sioux or the Igbo "tribes" (although tellingly enough it's more common for such groups to self-identify with the term "nation") the very act of casting fascists/ethnonationalists/whatevers in terms of a foreign type of social organization acts as a means of disavowal, intentionally or unintentionally letting ourselves off the hook for the extent to which the evil they express is entirely that of our own society. Which, I might add, at least somewhat resembles the ideological maneuver of the fascists/ethnonationalists/whatevers themselves: casting the antagonism and instability inherent to any capitalist society as the result of a foreign intruder, whose removal will render the nation peaceful and harmonious once again. Obviously the two aren't comparable in many other ways, but the end result in either case is to avoid facing the immanent contradictions of one's own national identity too directly.

[Dec 02, 2016] Some 6 million Americans are delinquent with auto loans and it's going to get worse

Dec 02, 2016 | www.marketwatch.com

The number of subprime auto loans sinking into delinquency hit their highest level since 2010 in the third quarter, with roughly 6 million individuals at least 90 days late on their payments.

It's behavior much like that seen in the months heading into the 2007-2009 recession, according to data from Federal Reserve Bank of New York researchers.

"The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years," the researchers, led by Andrew Haughwout, said Wednesday in a blog on their Liberty Street Economics site .

[Dec 02, 2016] Economists View Some Concrete Proposals for Economists and the Media

Dec 02, 2016 | economistsview.typepad.com
likbez : December 02, 2016 at 09:47 AM
There is no economics, only political economy. That means that financial oligarchy under liberalism puts the political pressure and takes measures to have the final say as for who occupy top academic positions.

Indirect negative selection under neoliberalism (much like in the USSR) occurs on multiple fronts, but especially via academic schools and indoctrination of students. The proper term for political pressure of science and creating an academic school that suppressed other is Lysenkoism.

So far this term was not mentioned even once here. But this what we have in the USA. Of course there are some dissidents, some of them quite vocal, but in no way they can get to the level of even a department chair.

In best traditions of Lysenkoism such people as Greg Mankiw, Krugman, DeLong and Summers after getting to their lucrative positions can do tremendous, lasting decades damage. The same is true for all other prominent neoliberal economists. It's not even about answers given, it is about questions asked and framework and terminology used.

Fish rots from the head. It is important to understand that essentially the same game (with minor variations, and far worse remuneration for sycophantism ) was played in the USSR -- the Communist Party essentially dictated all top academic position assignments, so mostly despicable sycophants had managed to raise to the top in this environment. Some people who can well mask their views under the disguise of formal obedience also happened, but were extremely rare. Situation in the past in the USA was better and such people as Hyman Minsky (who died in 1996) while not promoted were not actively suppressed either. But He spend only the last decade of his career under neoliberal regime.

What was really funny, is how quickly in late 80th prominent USSR economists switched to neoliberalism when the wind (and money) start flowing in this direction.

Such despicable academic charlatans, who previously swear to dogmas of Marxism, were very receptive of foreign grants, conferences trips and cash :-). Much like Summers was receptive for sky high honorarium from various banks (see http://www.prosebeforehos.com/article-of-the-day/04/10/the-corruption-of-larry-summers/ )

I would suggest that there are non are trivial links between Soviet political and economic science and neoclassical economics in the USA -- both are flavors of Lysenkoism.

[Nov 30, 2016] ZeroHedge as despicable propaganda site for oil shorts

Notable quotes:
"... mazamascience.com/oilexport and the BP bible says 2015 oil consumption growth in China was +5%. There is no continue to decline. And they have 21 million more cars this year burning oil. How can there be much decline, at all? ..."
"... Just checked EIA. No evidence of any significant fall in US consumption. It will probably rise. Indian consumption was +7% last year. No real evidence of a global drop in consumption. Population grows. So why is this surprising? ..."
peakoilbarrel.com
Watcher 11/30/2016 at 7:30 pm
Here is the sort of stuff going on. Some stuff profoundly right. Some stuff completely, factually wrong. Final paras from a ZH article:

In sum, OPEC has so far managed to fool the market, and send the price of oil surging off all time lows hit in early 2016 even as OPEC output has reached record highs, and the just concluded deal may end up eliminating just a small fraction of this excess supply.

All true.

There is also risk that demand – most notably out of China – will continue to decline, delaying the so-called market equilibrium even assuming full OPEC and non-OPEC compliance.

mazamascience.com/oilexport and the BP bible says 2015 oil consumption growth in China was +5%. There is no continue to decline. And they have 21 million more cars this year burning oil. How can there be much decline, at all?

And, courtesy of Modi's ridiculous "demonetization" attempt, India's economic outlook is suddenly in jeopardy: should Indian oil import demand decline as a result, OPEC will have to double its daily production cuts just to catch up to the drop in global demand.

Just checked EIA. No evidence of any significant fall in US consumption. It will probably rise. Indian consumption was +7% last year. No real evidence of a global drop in consumption. Population grows. So why is this surprising?

Perhaps the best forecast at this point is that the price of oil will remain rangebound between $45 and $55. Below that and more jawboning will emerge; above it and concerns about shale output will dominate.

That's not best. They are all equally worthless.

Finally, it is safe to say that this is OPEC's final attempt to prove it is still relevant in a shale-driven world after the "2014 Thanksgiving massacre" when Saudi Arabia essentially unilaterally crushed the organization, and the price of oil. Should OPEC blow this, it will likely be game over for any future attempts to artificially prop up the oil price by the world's oil exporters.

... ... ...

ZH can do better than this. They have.

[Nov 30, 2016] https://www.amazon.com/gp/customer-reviews/R2RP80CXZGIJ9W/ref=cm_cr_arp_d_rvw_ttl?ie=UTF8 ASIN=1621574954

Nov 30, 2016 | www.amazon.com

"It's not unreasonable for people who paid into a system for decades to expect to get their money's worth - that's not an "entitlement," that's honoring a deal. We as a society must also make an ironclad commitment to providing a safety net for those who can't make one for themselves."

This view is also not compatible with classic neoliberalism.

[Nov 30, 2016] Trumpism Has Dealt a Mortal Blow to Orthodox Economics and 'Social Science' naked capitalism

Notable quotes:
"... "The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive." ..."
Nov 30, 2016 | www.nakedcapitalism.com
likbez November 26, 2016 at 10:37 pm

I used to respect Krugman during Bush II presidency. His columns at this time looked like on target for me. No more.

Now I view him as yet another despicable neoliberal shill. I stopped reading his columns long ago and kind of always suspect his views as insincere and unscientific. In this particular case the key question is about maintaining the standard of living which can be done only if manufacturing even in robotic variant is onshored and profits from it re-distributed in New Deal fashion. Technology is just a tool. There can be exception for it but generally attempts to produce everything outside the US and then sell it in the USA lead to proliferation of McJobs and lower standard of living. Creating robotic factories in the USA might not completely reverse the damage, but might be a step in the right direction. The nations can't exist by just flipping hamburgers for each other.

Actually there is a term that explains well behavior of people like Krugman and it has certain predictive value as for the set of behaviors we observe from them. It is called Lysenkoism and it is about political control of science.

See, for example:
https://en.wikipedia.org/wiki/Lysenkoism
http://www.softpanorama.org/Skeptics/lysenkoism.shtml

Yves in her book also touched this theme of political control of science. It might be a good time to reread it. The key ideas of "ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism " are still current.

John Wright November 27, 2016 at 9:34 am

Another factor in maintaining manufacturing in the USA is what is referred to as furthering the "next bench syndrome".

This is where one is made aware of a manufacturing problem to solve due to proximity to the factory floor, and the solution leads to new profitiable products that can be used both inside/outside the original factory.

This might be an improved process or an improvement in manufacturing tooling that had not been anticipated before.

New products will be created with their profits/knowledge flowing to the country hosting the manufacturing plants.

The USA seems to be on a path of "we can create dollars and buy anything we want from people anywhere in the world".

Manufacturing dollars and credit rather than real goods might prove very short sighted if dollars are no longer prized.

Perhaps the TPP, with its ISDS provisions, indicates that powerful people understand this is coming and want additional wealth extraction methods from foreign countries.

Boris November 27, 2016 at 4:44 pm

We got ECONned all right.

It goes back to the late 1800's.

Excerpts from The Corruption of Economics

http://www.politicaleconomy.org/gaffney.htm

http://masongaffney.org/links.html

Henry George and The Reconstruction Of Capitalism
by Dr. Robert V. Andelson

http://schalkenbach.org/on-line-library/works-by-robert-v-andelson/henry-george-and-the-reconstruction-of-capitalism/

Beyond Left and Right

http://www.henrygeorge.org/isms.htm

Actus Purus November 26, 2016 at 10:35 am

The author mentions globalization and financialization. But what seems to be always left out (and given a pass) in these discussions is the role of central banks and monetary policy.

Central banking policy (always creating more money/credit) lies at the nexus of almost all that is wrong with modern capitalism and is the lubricant and fuel that enables financialization's endless growth.

Financialization leads to asset bubbles and deindustrialization. It hollows out industries. When money/credit are created in ever increasing quantity, the makeup of how we "work" shifts from goods producing to "finance".

Then through globalization, what we lack in goods, foreigners who accept our paper, seem to provide. At least for now. In a closed system, financialization has its natural limits. But enabled by cross-border trade, it metastasizes.

In the short run, it appears to be a virtuous circle. We print paper. They make real stuff. They take our paper. We take their stuff. We feel very clever.

But over time, wealth inequality grows. Industries are hollowed out. The banking sector dominates.

And then we get a populist uprising because people realize "something is wrong".

But mistakenly, they think it's globalization. Or free trade. Or capitalism. When all along, it's just central banking. Central banks are the problem. Central bankers are the culprits.

BecauseTradition November 26, 2016 at 4:56 pm

Central banks are the problem. Actus Purus

Yes, insofar as they create fiat for the private sector since that is obviously violation of equal protection under the law in favor of the banks and the rich.

Otoh, all citizens, their businesses, etc. should be allowed to deal directly in their nation's fiat in the form of account balances at the central bank or equivalent and not be limited to unsafe, inconvenient physical fiat, a.k.a. cash.

IDG November 27, 2016 at 4:12 am

Central banks are part of the problem, but not because any of the things you say. Abandon monetarism, is just wrong, on everything.

CB's do not control the rates effectively during the upturns (they are just procyclical as they add to savings though higher rates).

CB's "creating money" would mean loanable funds theory is right, but as it has been demonstrated over and over it's horribly wrong. Banks suffice themselves to expand credit on upturns, and CB'ers can do nothing about it. On downturns they cna try, and fail, because the appetite for credit is just not there. Credit expansion and contraction is endogenous and apart of of what CB's do, not to speak about all the forms of shadow money which are the real outliers and trouble makers.

What CB's do, in practice, is to prevent capitalism from collapsing on crisis, making "bad money" good, by stabilising asset prices. All their tools are reactive, not pro-active, so they cannot create any condition, because they react to conditions. They neither set the rates in reality, nor "create money" that enters the real economy in any meaningful way.

The religion of "central bankism" is part of the problem, but as it is the religion of "monetarism" (which are the same) on which many of those ideas are based.

BecauseTradition November 27, 2016 at 9:40 am

Banks suffice themselves to expand credit on upturns, and CB'ers can do nothing about it IDG

Yes, "loans create deposits" but only largely virtual liabilities wrt to the non-bank private sector. We should fix that by allowing the non-bank private sector to deal with reserves too then it would be much more dangerous for banks to create liabilities since bank runs would be as easy and convenient as writing a check to one's cb account or equivalent. Of course, government provided deposit insurance could then be abolished too since accounts at the cb or equivalent are inherently risk-free.

Our system is a dangerous mess because of privileges for depository institutions – completely unnecessary privileges given modern computers and communications.

Actus Purus November 27, 2016 at 9:42 am

In other words, another "pass" for central banks. It's not their fault. It's just the economy. It's how "markets" work.

stefan November 26, 2016 at 10:38 am

Get ready for real kleptocracy.

Breitbart obscurantism + Trump/Bannon misdirection = turkeys vote for thanksgiving.
Sessions views on race at Justice = curtailed civil rights.
Wilbur Ross pension stripping = privatize Social Security.
DeVos at education = privatize the golden egg of public education.
85% tax credit for private infrastructure spending = fire sale of the public square (only rich need apply).
3~4 Military generals in the cabinet = enforcement threat for crypto-fascist state.
McGahn at counsel + Pompeo at CIA = Koch Bros.
Ryan at speaker = privatize Medicare

Welcome to government of the billionaires, by the billionaires, for the billionaires.

btw, if Giuliani is appointed to a cabinet post, he will have to explain his foreknowledge of the NY FBI→Kallstrom→Comey connection→to Congress under oath (if they aren't too afraid to ask).

a different chris November 26, 2016 at 9:15 pm

I worry along with you, but again: When somebody Ms DeVos opens her mouth people just naturally recoil. Trump doesn't seem to have grasped the only thing that mattered in his election – you want your enemies to suck. His appointees are people that suck. Hillary would have appointed smooth-talkers who could effortlessly move between "private and public" positions.

PS: Paul Ryan is a good counterexample – people fall for his BS because he isn't quite a stupid as, say Guiliani. Of course he was elected, not picked by Trump.

Robert Dannin November 26, 2016 at 10:41 am

mr reddy solves the riddle of the Great Refusal but doesn't far enough: certainly mainstream economists were wrong to act as cheerleaders for the kleptocracy, yet they were also complicit in a material sense by furnishing all the necessary algorithms to boost the derivatives industry into the realm of corporate cyber-theft. that genie isn't going back into bottle. what's in store for us then? economic apartheid. just read what the new team has been saying about walls, guns, police, military and terrorism. the bannon plan is for heavily policed gated communities monopolizing vital resources; high surveillance, rights abatement zones for the proletariat; and a free-fire wilderness of lumpen gangsters, gun-toting vigilantes, survivalist cults, etc. competing for subsistence. mad max, only run by people worse than mel gibson. close to what we already have but once legislated into existence impossible to reverse without a violent revolution. once again mr. reddy is correct: hobbes' leviathan is the negation of social science.

Waldenpond November 26, 2016 at 11:39 am

hmmmm .. Trump said quite a few contradictory things during his campaign and it would seem an error to believe anything a candidate says on either side of an issue. Have the Koch brothers (who are involved w/Trump) been particularly unhappy with the numerous billions they've accumulated under Obama? I expect this regime to be more along the 'different globalization' side (more a shuffling of the deck chairs on the Titanic). Manufacturing will be back in relation to the degree – penalties are eliminated on 'repatriated' funds, land is eminent domained on behalf of oligarchs, private profit is granted primacy over pollution, then build their factories with public money and abolish the minimum wage. Austerity will continue but the new con will be private/public partnerships. Don't you want to buy you friend/family member/neighbor a job? Don't you?

The elite, including the Trump's, are going to continue their actions until they've taken it all.

Wendell Fitzgerald November 26, 2016 at 1:06 pm

Since you mention land you might be interested in the idea of land value taxation a way to take the land back from the oligarchs an idea that has been around for a long time assiduously ignored by folks like Naked Capitalism.

JEHR November 26, 2016 at 5:35 pm

Mr. Fitzgerald, if you search in NC for "land value taxation" you will see many articles, especially from Mr. Hudson. NC has thoroughly covered a lot of territory regarding this topic.

a different chris November 26, 2016 at 9:24 pm

Yes you could probably catch us restlessly muttering "Henry George" in our sleep half the time.

The problem is it's a really, really hard sell. It just sounds funny. Pittsburgh actually had it until a few years ago when it was "discovered" and before there was even a discussion the Democratic mayor and City Council who should have known better had rescinded it before anybody got a chance to say anything.

https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_States

" during 2001 after years of underassessment, and the system was abandoned in favor of the traditional single-rate property tax. The tax on land in Pittsburgh was about 5.77 times the tax on improvements."

To be good Russian plants, we do actually need to know things about Amerika

Anyway, here's the problem: people just voted for a billionaire how you gonna get this type of taxation approved given the Pittsburgh example?

Allegorio November 26, 2016 at 11:24 pm

It seems to be forgotten that this was a vote against Clinton and not a vote for Trump. If Trump goes back on his progressive platform, jobs jobs jobs there will be a backlash so fast that it will give everyone, especially the billionaires whiplash. Let them touch one hair on Social Security's head or privatize Medicare, there will be another big surprise in the mid-term elections. When the good people of the rust belt find out about the plans to put rentier tolls on all that public infrastructure, trust me the pitchforks will come out from their corners quick as you blink The best laid plans of billionaires and their lackeys often go awry. The curtain has been lifted. If Trump thinks he can satisfy the working class by giving another huge tax break to the .01%, he better think again. They do not have enough rubber bullets nor pepper spray.

Michael November 27, 2016 at 3:38 am

Nah, as long as Trump keeps blaming folks of color, he's got a good six years. You overestimate the people of Flyover. Yes, they got hosed by Obama, but they've been electing Republicans to flog them for 30 years.

Lambert Strether November 27, 2016 at 12:22 pm

Speaking of blaming

I love the Democrat attitude that "Democrats can never fail. They can only be failed," in this case by approximately 50% of the population.

Anonymous November 27, 2016 at 2:53 pm

It's a hard sell for good reason. Many Americans are land rich and cash poor. The idea that they'd have to sell property to pay such a tax offends even the simplest conception of sound land planning. If a lot more property came on the market at once, as it would have to under the land tax scheme, we'd be Japan all over again.

BecauseTradition November 27, 2016 at 11:41 am

Taxes should be unavoidable to avoid violating equal protection under the law and land taxes are certainly unavoidable in that land can't be hidden as income, for example, can be.

Another unavoidable tax, except for the existence of physical fiat* (notes and coins), would be a tax on fiat, i.e. negative interest.

*Yet these can be taxed when bought and sold to the central bank with/for "reserves"**
**Just another name for fiat account balances at the central bank when the account owners are depository institutions.

animalogic November 28, 2016 at 1:11 am

Here's a few old fashioned & long derided ideas for taxes:
An Estate Tax of 30% on estates larger than say, 5 million. Yes I know the US has one, but isn't it suffering death by a thousand cuts ?
A sales tax (say 30%) on Luxury goods ? If you can afford that Rolls Royce, you can afford the tax
Tax on financial transactions (ie: a Tobin tax).
I'm sure we could add a couple dozen more tax ideas to the list. (The idea is not surpluses, but to reduce inequality )

BecauseTradition November 28, 2016 at 9:17 am

but to reduce inequality ) animalogic

The goal should be to reduce injustice – preferably at its source. And the source of much injustice is surely government privileges for private credit creation and other welfare for the rich such as positive interest paying sovereign debt.

Still, there's previous injustice to deal with so asset redistribution should be on the table too and that could include taxing the rich to give to the poor – certainly not to run a surplus (or even a balanced budget) as you say.

Altandmain November 26, 2016 at 11:47 am

Mainstream analysts don't want to recognize the real problem. They failed the people have lost their legitimacy to govern.

Not saying Trump is the solution (I'm hoping for a solution from the left and think that Trump could enable his cronies, but nothing else), but the Establishment is unworthy to govern.

Wendell Fitzgerald November 26, 2016 at 1:24 pm

A solution that most people would consider being from the left but which is the radical center (taking valid ideas from both left and right) is land value taxation the wedge issue to tax the various sources of unearned income (estimated at 40+% of GNP however you determine it) thus allowing for the elimination of taxation of earned income from wages and profit from the investment of real capital in the real economy. Taxing community created land value and making the distinction between earned and unearned income has been assiduously ignored and avoided by mainstream economists, most of our vaunted/sainted public intellectuals and sources like naked capitalism but since all of that has failed there is nothing to lose by considering what this author, Sanjay Reddy, says is necessary: "It [social science] can only save itself through comprehensive reinvention, from the ground up." I suggest that the this has already been done literally from the ground up by the analysis that has been around for a very long time that takes land, how its value is created, who owns it and what happen when you tax its value into account. Happy day.

Oregoncharles November 27, 2016 at 1:37 pm

I recognize the concept, but suggesting some sources would help follow up on your point.

Michael November 27, 2016 at 3:38 am

I still have no idea what the point of an economist who didn't raise a flag before the 2007 crisis is.

Why would any of them retain their jobs?

Lambert Strether November 27, 2016 at 12:07 pm

The same goes for The Blob.

Rosario November 26, 2016 at 12:45 pm

We finally made it to the post-modern wasteland. It is pretty weird to see the post-modern methods used by social scientists for decades to dissect culture actually manifest in practiced culture.

susan the other November 26, 2016 at 1:14 pm

TINA was definitely an ideology – an idea backed by interest. They were making fun of Thatcherism last nite on France 24 because it had been so devastating and now one of the candidates in France is talking her old trash again. Humor is effective against ideology when all else fails but it takes a while. But as defined above, we actually do have an alternative – our current alternative is "illiberal majoritarianism". Sounds a tad negative. We should just use the word "democracy".

pzoellner November 26, 2016 at 2:36 pm

Excellent thinking. Thanks to all

Sound of the Suburbs November 26, 2016 at 2:39 pm

The problem with free trade, a historical lesson:

"The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive."

The landowners wanted to increase their profit by charging a higher price for corn, but this posed a barrier to international free trade in making UK wage labour uncompetitive by raising the cost of living for workers.

In a free trade world the cost of living needs to be the same in West and East as this sets the wage levels.

The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

These costs all have to be covered by wages and US businesses are now squealing about the high minimum wage.

US labour can never compete with Eastern labour and will have to be protected by tariffs.

Free trade has requirements and you must meet them before you can engage in free trade.

The cost of living needs to be the same in West and East.

BecauseTradition November 27, 2016 at 12:32 pm

Assume, for the sake of argument, that all assets in the West were equally owned by its citizens? Then wouldn't free trade with the East be a universal blessing for the citizens of the West and not a curse for some (actually many) of them?

So the problem is unjust asset distribution? But how could that occur if our economic system is just? Except it isn't just since government subsidies for private credit creation are obviously unjust in that the poor are forced to lend (a deposit is legally a loan) to banks for the benefit of the rich.

Oregoncharles November 27, 2016 at 1:31 pm

A technical note, to avoid possible confusion: "corn" in British means wheat and other small grains – a "corn" is a kernel. Maize was not a big factor in Britain; too far north.

Otherwise, good point.

Sound of the Suburbs November 26, 2016 at 2:43 pm

There are two certainties in life – death and taxes.

There are two certainties about new versions of capitalism; they work well for a couple of decades before failing miserably.

Capitalism mark 1 – Unfettered Capitalism

Crashed and burned in 1929 with a global recession in the 1930s.
The New Deal and Keynesian ideas promised a bright new world.

Capitalism mark 2 – Keynesian Capitalism

Ended with stagflation in the 1970s.
Market led Capitalism ideas promised a bright new world.

Capitalism mark 3 – Unfettered Capitalism – Part 2 (Market led Capitalism)

Crashed and burned in 2008 with a global recession in the 2010s.

We are missing the vital ingredient.

When the first version of capitalism failed, Keynes was ready with a new version.

When the second version of capitalism failed, Milton Freidman was waiting in the wings with his new version of capitalism.

Elites will always flounder around trying to stick with what they know, it takes someone with creativity and imagination to show the new way when the old way has failed.

Today we are missing that person with creativity and imagination to lead us out of the wilderness and
stagnation we have been experiencing since 2008.

Sound of the Suburbs November 26, 2016 at 2:45 pm

What is missing from today's economics?

1) The work of the Classical Economists and the distinction between "earned" and "unearned" income, also "land" and "capital" need to be separated again (conflated in neoclassical economics)

Reading Michael Hudson's "Killing the Host" is a very good start

2) How money and debt really work. Money's creation and destruction on bank balance sheets.

3) The work of Irving Fisher, Hyman Minsky and Steve Keen on debt inflated asset bubbles

4) The work of Richard Koo on dealing with balance sheet recessions
https://www.youtube.com/watch?v=8YTyJzmiHGk

5) The realisation that markets have two modes of operation:

a) Price discovery
b) Bigger fool mode, where everyone rides the bubble for capital gains

There may be more

The Euro was designed with today's defective economics.
Oh dear, no wonder it's going wrong.

a different chris November 26, 2016 at 9:29 pm

>The Euro was designed with today's defective economics.

Man I didn't think of that. What comically lousy timing. I do like this post because it similar to sigh, ok it asserts my belief but still don't think I'm in an echo chamber here, I actually want people to know what I think so they can reinforce the good and whittle out the bad anyway, asserts my belief that "economics" isn't a science but when used in the best way is a toolkit, here we need an hammer (austerity), here we need a screwdriver (some tweaking). It isn't one tool for all jobs for all time.

Sound of the Suburbs November 27, 2016 at 1:24 pm

American's are brainwashed from birth about capitalism and Milton Freidman may have been as susceptible as the next man.

He may not have realised he was building on a base that had already been corrupted, the core of neoclassical economics.

The neoclassical economists of the late 19th century buried the difference between "earned" and "unearned" income.

These economists also conflated "land" and "capital" to cause further problems that were clear to the Classical Economists looking out on a world of small state, raw capitalism.

Thorstein Veblen wrote an essay in 1898 "Why is economics not an evolutionary science?".

Real sciences are evolutionary and old theory is replaced as new theory comes along and proves the old ideas wrong.

Economics needs a scientific, evolutionary rebuild from the work of the classical economists.

Most of the UK now dreams of giving up work and living off the "unearned" income from a BTL portfolio, extracting the "earned" income of generation rent.

The UK dream is to be like the idle rich, rentier, living off "unearned" income and doing nothing productive.

This is what happens when stuff goes missing from economics.

Keynes realised wage income was just as important as profit.
Wage income looks after the demand side of the equation and profit the supply side.
I think we will find he was right, this knowledge has just gone missing at the moment.

Keynes studied the Great Depression and noted monetary stimulus lead to a "liquidity trap".
Businesses and investors will not invest without the demand there to ensure their investment will be worthwhile.
The money gets horded by investors and on company balance sheets as they won't invest.
Cutting wages to increase profit just makes the demand side of the equation worse and leads you into debt deflation.
Central Banks today talk about the "savings glut" not realising this is probably Keynes's "liquidity trap".
It's more missing stuff.

When Keynes was involved in Bretton Woods after the Second World War they put in mechanisms for recycling the surplus, to keep the whole thing running.

The assumption today is that capitalism will just reach stable equilibriums by itself.

The Euro is based on this idea, but Greece has just reached max. debt and collapsed, it never did reach that stable equilibrium.

Recycling the surplus would probably have worked better.

Science is evolutionary for a reason.

Michael November 27, 2016 at 3:40 am

Energy and true scarcity in the form of the biosphere are still missing from today's economics.

BecauseTradition November 27, 2016 at 2:37 pm

Ethical fiat and credit creation are missing and have been for centuries.

UserFriendly November 26, 2016 at 8:09 pm

I disagree that we don't have a ready to go replacement. MMT. We just have TPTB throwing $$$ around to make sure no one hears about it, much less does anything.

Barry disch November 26, 2016 at 5:16 pm

Well written concentrated synopsis of how our economy has evolved over the last 35 years.

JEHR November 26, 2016 at 5:39 pm

I believe that our way out of this morass is to start by buying locally. There are always people who make things and they need to be supported. We may not get the cheap products, but we can build our communities up gradually over time. Our standard of living will be different but we will have our dignity and the means for creating prosperous communities.

Arizona Slim November 26, 2016 at 6:29 pm

I have been a member of a localist group here in AZ. Said group does a great job of appealing to people from across the political spectrum. And that is a good example to follow.

Ulysses November 27, 2016 at 7:06 am

"I believe that our way out of this morass is to start by buying locally."

I very much like the localist movement, and I try very hard to support it in upstate NY, among other places. The problem with this approach is that there are simply way too many people for us to painlessly revert back to an artisanal, agrarian 18th c. lifestyle.

To put this in Empire State terms: we might just be able to accommodate hundreds of thousands of people who used to work for Kodak, I.B.M, or Xerox upstate– in new jobs making craft beer or high-quality string instruments, etc. Yet what do we do with the many millions of people, who live downstate, who currently work in jobs very dependent on a globalized economy?

Greg November 26, 2016 at 11:25 pm

We've seen a few economists posting lately to say that all social sciences got it wrong, and especially economics. What's curious to me is that non of the examples given apply to any social science except economics.

Is this the same discipline that refuses to acknowledge the value of other disciplines and cross-discipline research, ducking for cover behind the very disciplines it's been snobbing?
'All social sciences' indeed.

John k November 27, 2016 at 12:53 am

The election was less about trump gaining voters in the rust belt than Clinton losing hers. Romney lost with exactly as many votes as trump got because 6 million that voted for black Obama preferred to stay home rather than vote for white Clinton.
All the dems need to do is to run a candidate willing to spend quality time in the swing states, somebody not totally corrupt and not verbally advocating confrontation with Russia would also be a big help, though this already rules out most dem elites.

Of course if trump manages to get a lot of infra built, and gets a lot of decent jobs, his support in 2020 will grow, maybe to the point only a strong progressive could beat him.
But today's dem elites will fight tooth and nail to keep real progressives from controlling the party, as instructed by their corp overlords remember, bankers might go to jail if the wrong person gets AG. First indication is Keith on dec 1 can/will big o keep him out?

LifeIsLikeABeanstalk November 27, 2016 at 2:17 am

I liked this 'take' by Prof. Reddy a lot in terms of looking at what happened to bring us to a Trump Presidency (with an observation that Orange Duce hasn't YET been sworn in).

But if he thinks that a Tea Party shaped Republican House and Senate and soon to be skewed Supreme Court aren't about to launch a season of Rent Taking and Austerity to levels previously only attained in Arthur Laffer's wet dreams he needs his otherwise rational head examined.

Schofield November 27, 2016 at 9:22 am

Don't go so excited the "Trump Revolution" like the "Obama Revolution" will likely end up as "hopeless" for ordinary folk. So for starters Trump's tax breaks will save the 1% fifteen percent and the rest of us 2 percent! Already the msm including my local paper are already grinding out the counter-propaganda against raising tariff barriers for China. The majority of the electorate are too ignorant to figure much of it out and come 2024 will be voting Ivanka Trump in as president!

GregoryA November 28, 2016 at 12:44 am

If Trump raises MORE(notice that word son) tariffs against China, he will get a nice uppercut across the forehead when China cancels contracts one after another and jobs start being lost in the next NBER recession. His ego can't take that.

He was the Mercers introduction to the elite, nothing more or less. If anything, the Republicans are more Jewy than ever.

Oregoncharles November 27, 2016 at 1:09 pm

"The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization."

IOW, it isn't science; it's political ideology.

The environmental economist Herman Daley traces that back to the very beginning of the field; he says the earliest economists essentially chose sides in the contest then raging between landowners (resource based) and merchants (trade based). That made them propagandists, not referees. And it's the reason economics, from the beginning, suppressed the distinction between natural resources, like land, water, and minerals, and human-created capital. It recognized only two "production factors," when in reality there are at least three. Marx picked up the same self-serving :"error."

Oregoncharles November 27, 2016 at 1:20 pm

" illiberal majoritarianism"
That's an unfortunate word choice, considering that Trump lost the election by nearly 2 million votes. It was an extraordinary demonstration of the defective Electoral College system. Maybe now we'll get some action on the Popular Vote initiative.

It's important to remember that the rebellion is "illiberal" mainly because the "liberal" parties refuse to offer a "liberal" populism, aka the New Deal. You could call it an old, proven idea. Some of us see that as weak tea, but even that isn't on offer outside the marginalized Left. (This is the essential point of Thomas Franks' "What's the Matter with Kansas.")

Of course, that's just a further illustration of the author's point.

Paul Hirschman November 27, 2016 at 1:57 pm

One of the most insightful chapters in Karl Polanyi's THE GREAT TRANSFORMATION is about something Karl calls "the discovery of society." It is the story of how those who wrestled with the fundamental falsehoods of the "self-regulating market" [our Libertarian friends' dreamworld] had to begin thinking about how people in their everyday lives actually, really, incompletely, made a life for themselves in a world defined by trickle-down economics. It was never a pretty sight, but the lesson was that the "self-regulating market" was going to be regulated somehow by non-economic actors with non-economic considerations foremost in mind, like it or not, or face destruction by human beings whose lives were distorted beyond what would be tolerated by ordinary people. Most people put up with neoliberal BS for a generation because that's what most people do, most of the time, even when they know they're being sold a bunch of horsecr*p. But the limit of what people will tolerate in a society defined by the false gods of market capitalism is reached periodically. Trump's victory tells us that one of these limits has been reached. The question now is, "What are we going to "discover" about ourselves and about the society we want to live in–and will we find a way to create it, assuming it's something good?" (Or flee from, if it turns sour.)

TINA folks will repeat, over and over, that "there is no alternative," but that bugaboo has just been smashed. Clinton, Summers, Obama, Rubin, Schumer, and the many, many lesser lights of Neo-Liberalism have become "old hat" almost overnight. Let's hope our discovery of society includes a stronger dose of Reason and Solidarity than would seem to exist in Trumpworld.

Phil November 28, 2016 at 3:33 am

Here's the deal:
Automation is hallowing out work *at all levels*. Don't believe me? Read this.
http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
Summary:
http://www.eng.ox.ac.uk/about/news/new-study-shows-nearly-half-of-us-jobs-at-risk-of-computerisation

Add to the above:
Projected population increases, worldwide -including some demographic vertical projections
http://www.pewresearch.org/fact-tank/2014/02/03/10-projections-for-the-global-population-in-2050/

ergo: Less work (at all levels) + increasing population (which includes some explosive variables, like a large increase of older persons who will require economic support from fewer younger workers) = a massive increase in tension re: the struggle for available necessities.

Technology innovation will help with some of this, but the great, looming problem is: how are billions of idle people with nothing to do going to be motivated to remain non-disruptive? I can see a massive surveillance state controlling the "idles"; perhaps new technologies that permit people to jack their brains into the network for diversion (but how long before people become desensitized to that?). Will there be a "spiritual" revolution that is not attached to current dogmatic religions, that values having less, sharing more, cooperating with others, etc.? Hard to say.

Anyway, it's coming, yet very few policy makers are talking about it. I'll bet the Pentagon is planning for this scenario, among others.

In twenty years – maybe a few more – we should be able to begin to migrate away from earth. It will probably be a LONG time before extra-earth settlements are feasible and sustainable. That said, we here on earth are going to have our hands full.

Can humanity somehow find ways to overcome its wired propensity for status reflected by material wealth, and somehow change that status-seeking to a sharing model that is not top-down?

I've been pondering this for a while. People much smarter than I will hopefully lead the way. We have our work cut out for us.

I don't have any answers

[Nov 30, 2016] The Electoral Consequences of Globalization

Notable quotes:
"... Capital in the Twenty-first Century, ..."
Nov 29, 2016 | angrybearblog.com
by Joseph Joyce The Electoral Consequences of Globalization

The reasons for the election of Donald Trump as President of the U.S. will be analyzed and argued about for many years to come. Undoubtedly there are U.S.-specific factors that are relevant, such as racial divisions in voting patterns. But the election took place after the British vote to withdraw from the European Union and the rise to power of conservative politicians in continental Europe, so it is reasonable to ask whether globalization bears any responsibility.

The years before the global financial crisis were years of rapid economic globalization. Trade flows grew on average by 7% a year over the 1987-2007 period. Financial flows also expanded, particularly amongst the advanced economies. Global financial assets increased by 8% a year between 1990 and 2007 . But all this activity was curtailed in 2008-09 when the global financial crisis pushed the world economy into a downturn. Are the subsequent rises in nationalist sentiment the product of these trends?

Trump seized upon some of the consequences of increased trade and investment to make the case that globalization was bad for the U.S. He had great success with his claim that international trade deals are responsible for a loss of jobs in the manufacturing sector. In addition, he blamed outward foreign direct investment (FDI) by U.S. firms that opened production facilities in foreign countries for moving manufacturing jobs outside the U.S. Among the firms that Trump criticized were Ford Motor, Nabisco and the Carrier Corporation , which is moving a manufacturing operation from Indiana to Mexico.

Have foreign workers taken the jobs of U.S. workers? Increased trade does lead to a reallocation of resources, as a country increases its output in those sectors where it has an advantage while cutting back production in other sectors. Resources should flow from the latter to the former, but in reality it can be difficult to switch employment across sectors. Daron Acemoglu and David Autor of MIT, David Dorn of the University of Zurich, Gordon Hanson of UC-San Diego and Brendan Price of MIT have found that import competition from China after 2000 contributed to reductions in U.S. manufacturing employment and weak U.S. job growth. They estimated manufacturing job losses due to Chinese competition of 2.0 – 2.4 million. Other studies find similar results for workers who do not have high school degrees.

Moreover, multinational firms do shift production across borders in response to lower wages, among other factors. Ann E. Harrison of UC-Berkeley and Margaret S. McMillan of Tufts University looked at the hiring practices of the foreign affiliates of U.S. firms during the period of 1977 to 1999. They found that lower wages in affiliate countries where the employees were substitutes for U.S. workers led to more employment in those countries but reductions in employment in the U.S. However, when employment across geographical locations is complementary for firms that do significantly different work at home and abroad, domestic and foreign employment rise and fall together.

Imports and foreign production, therefore, have had an impact on manufacturing employment in the U.S. But several caveats should be raised. First, as Erik Brynjolfsson and Andrew McAfee of MIT and others have pointed out, technology has had a much larger effect on jobs. The U.S. is the second largest global producer of manufactured goods, but these products are being made in plants that employ fewer workers than they did in the past. Many of the lost jobs simply do not exist any more. Second, the U.S. exports goods and services as well as purchases them. Among the manufactured goods that account for significant shares of U.S. exports are machines and engines, electronic equipment and aircraft . Third, there is inward FDI as well as outward, and the foreign-based firms hire U.S. workers. A 2013 Congressional Research Service study by James V. Jackson reported that by year-end 2011 foreign firms employed 6.1 million Americans, and 37% of this employment-2.3 million jobs-was in the manufacturing sector. More recent data shows that employment by the U.S. affiliates of multinational companies rose to 6.4 million in 2014. Mr. Trump will find himself in a difficult position if he threatens to shut down trade and investment with countries that both import from the U.S. and invest here.

The other form of globalization that drew Trump's derision was immigration. Most of his ire focused on those who had entered the U.S. illegally. However, in a speech in Arizona he said that he would set up a commission that would roll back the number of legal migrants to "historic norms."

The current number of immigrants (42 million) represents around 13% of the U.S. population, and 16% of the labor force. An increase in the number of foreign-born workers depresses the wages of some native-born workers, principally high-school dropouts, as well as other migrants who arrived earlier. But there are other, more significant reasons for the stagnation in working-class wages . In addition, a reduction in the number of migrant laborers would raise the ratio of young and retired people to workers-the dependency ratio-and endanger the financing of Social Security and Medicare. And by increasing the size of the U.S. economy, these workers induce expansions in investment expenditures and hiring in areas that are complementary.

The one form of globalization that Trump has not criticized, with the exception of outward FDI, is financial. This is a curious omission, as the crisis of 2008-09 arose from the financial implosion that followed the collapse of the housing bubble in the U.S. International financial flows exacerbated the magnitude of the crisis. But Trump has pledged to dismantle the Dodd-Frank legislation, which was enacted to implement financial regulatory reform and lower the probability of another crisis. While Trump has criticized China for undervaluing its currency in order to increase its exports to the U.S., most economists believe that the Chinese currency is no longer undervalued vis-à-vis the U.S. dollar.

Did globalization produce Trump, or lead to the circumstances that resulted in 46.7% of the electorate voting for him? A score sheet of the impact of globalization within the U.S. would record pluses and minuses. Among those who have benefitted are consumers who purchase items made abroad at cheaper prices, workers who produce export goods, and firms that hire migrants. Those who have been adversely affected include workers who no longer have manufacturing jobs and domestic workers who compete with migrants for low-paying jobs. Overall, most studies find evidence of positive net benefits from trade . Similarly, studies of the cost and benefits of immigration indicate that overall foreign workers make a positive contribution to the U.S. economy.

Other trends have exerted equal or greater consequences for our economic welfare. First, as pointed out above, advances in automation have had an enormous impact on the number and nature of jobs, and advances in artificial intelligence wii further change the nature of work. The launch of driverless cars and trucks, for example, will affect the economy in unforeseen ways, and more workers will lose their livelihoods. Second, income inequality has been on the increase in the U.S. and elsewhere for several decades. While those in the upper-income classes have benefitted most from increased trade and finance, inequality reflects many factors besides globalization.

Why, then, is globalization the focus of so much discontent? Trump had the insight that demonizing foreigners and U.S.-based multinationals would allow him to offer simple solutions-ripping up trade deals, strong-arming CEOs to relocate facilities-to complex problems. Moreover, it allows him to draw a line between his supporters and everyone else, with Trump as the one who will protect workers against the crafty foreigners and corrupt elite who conspire to steal American jobs. Blaming the foreign "other" is a well-trod route for those who aspire to power in times of economic and social upheaval.

Globalization, therefore, should not be held responsible for the election of Donald Trump and those in other countries who offer similar simplistic solutions to challenging trends. But globalization's advocates did indirectly lead to his rise when they oversold the benefits of globalization and neglected the downside. Lower prices at Wal-Mart are scarce consolation to those who have lost their jobs. Moreover, the proponents of globalization failed to strengthen the safety networks and redistributive mechanisms that allow those who had to compete with foreign goods and workers to share in the broader benefits. Dani Rodrik of Harvard's Kennedy School has described how the policy priorities were changed: "The new model of globalization stood priorities on their head, effectively putting democracy to work for the global economy, instead of the other way around. The elimination of barriers to trade and finance became an end in itself, rather than a means toward more fundamental economic and social goals."

The battle over globalization is not finished, and there will be future opportunities to adapt it to benefit a wider section of society. The goal should be to place it within in a framework that allows a more egalitarian distribution of the benefits and payment of the costs. This is not a new task. After World War II, the Allied planners sought to revive international trade while allowing national governments to use their policy tools to foster full employment. Political scientist John Ruggie of the Kennedy School called the hybrid system based on fixed exchange rates, regulated capital accounts and government programs " embedded liberalism ," and it prevailed until it was swept aside by the wave of neoliberal policies in the 1980s and 1990s.

What would today's version of "embedded liberalism" look like? In the financial sector, the pendulum has already swung back from unregulated capital flows and towards the use of capital control measures as part of macroprudential policies designed to address systemic risk in the financial sector. In addition, Thomas Piketty of the École des hautes etudes en sciences (EHESS) and associate chair at the Paris School of Economics , and author of Capital in the Twenty-first Century, has called for a new focus in discussions over the next stage of globalization: " trade is a good thing, but fair and sustainable development also demands public services, infrastructure, health and education systems. In turn, these themselves demand fair taxation systems."

The current political environment is not conducive toward the expansion of public goods. But it is unlikely that our new President's policies will deliver on their promise to return to a past when U.S. workers could operate without concern for foreign competition or automation. We will certainly revisit these issues, and we need to redefine what a successful globalization looks like. And if we don't? Thomas Piketty warns of the consequences of not enacting the necessary domestic policies and institutions: "If we fail to deliver these, Trumpism will prevail."

cross posted with Capital Ebbs and Flows

Comments (10) | Digg Facebook Twitter | --> --> --> Comments (10)

  1. spencer November 29, 2016 10:33 am

    Since 1980, US manufacturing output has approximately doubled while manufacturing employment fell by about a third.

    Yes, globalization impacts the composition of output and it is a contributing factor in the weaker growth of manufacturing output. but overall it has accounted for a very minor share of the weakness in manufacturing employment since 1980. Productivity has been the dominant factor driving manufacturing employment down.

  2. JimH November 29, 2016 11:11 am

    "Overall, most studies find evidence of positive net benefits from trade."

    Of course they do! And in your world, studies always Trump real world experience.

    Studies on trade can ignore the unemployed workers with a high school education or less. How were they supposed to get an equivalent paying job? EDUCATION they say! A local public university has a five year freshman graduation rate of 25%. Are those older students to eat dirt while attempting to accumulate that education!

    Studies on trade can ignore that illegal immigration increases competition for the those under educated employees. Since 1990 there has been a rising demand that education must be improved! That potential high school drop outs should be discouraged by draconian means if necessary. YET we allow immigrants to enter this country and STAY with less than the equivalent of an American high school education! Why are we spending so much on secondary education if it is not necessary!

    "In Mexico, 34% of adults aged 25-64 have completed upper secondary education, much lower than the OECD average of 76% the lowest rate amongst OECD countries."
    See: http://www.oecdbetterlifeindex.org/countries/mexico/

    Trade studies can ignore the fate of a small town when its major employer shuts down and leaves. Trade studies can assume that we are one contiguous job market. They can assume that an unemployed worker in Pennsylvania will learn of a good paying job in Washington state, submit an application, and move within 2 weeks. Or assume that the Washington state employer will hold a factory job open for a month! And they can assume that moving expenses are trivial for an unemployed person.

    Our trade partners have not attempted anything remotely resembling balanced trade with us.

    Here are the trade deficits since 1992.
    Year__________US Trade Balance with the world
    1992__________-39,212
    1993__________-70,311
    1994__________-98,493
    1995__________-96,384
    1996__________-104,065
    1997__________-108,273
    1998__________-166,140
    1999__________-258,617
    2000__________-372,517
    2001__________-361,511
    2002__________-418,955
    2003__________-493,890
    2004__________-609,883
    2005__________-714,245
    2006__________-761,716
    2007__________-705,375
    2008__________-708,726
    2009__________-383,774
    2010__________-494,658
    2011__________-548,625
    2012__________-536,773
    2013__________-461,876
    2014__________-490,176
    2015__________-500,361
    From: https://www.census.gov/foreign-trade/statistics/historical/gands.pdf

    AND there is the loss of the income from tariffs which had been going to the federal government! How has that effected our national debt?

    "However, when employment across geographical locations is complementary for firms that do significantly different work at home and abroad, domestic and foreign employment rise and fall together."

    And exactly how do you think that the US government could guarantee that complementary work at home and abroad. Corporations are profit seeking, amoral entities, which will seek profit any way they can. (Legal or illegal)

    The logical conclusion of your argument is that we could produce nothing and still have a thriving economy. How would American consumers earn an income?

    Indiana, Michigan, Ohio, Pennsylvania, and Wisconsin are RUST BELT states. Were the voters there merely ignorant or demented? You should never ever run for elected office.

  3. Beverly Mann November 29, 2016 12:30 pm

    Meanwhile, Trump today chose non-swampy Elaine Chao, Mitch McConnell's current wife and GWBush's former Labor Secretary, as Transportation Secretary, to privatize roads, bridges, etc.

  4. JimH November 29, 2016 12:36 pm

    The trade balances are in millions of dollars in the table in my last comment.

    Global trade had a chance of success beginning in 1992. But that required a mechanism which was very difficult to game. A mechanism like the one that the Obama administration advocated in October 2010.

    "At the meeting in South Korea's southern city of Gyeongju, U.S. officials sought to set a cap for each country's deficit or surplus at 4% of its economic output by 2015.
    The idea drew support from Britain, Australia, Canada and France, all of which are running trade deficits, as well as South Korea, which is hosting the G-20 meetings and hoping for a compromise among the parties.
    But the proposal got a cool reception from export powerhouses such as China, which has a current account surplus of 4.7% of its gross domestic product; Germany, with a surplus of 6.1%; and Russia, with a surplus of 4.7%, according to IMF statistics."
    See: http://articles.latimes.com/2010/oct/24/business/la-fi-g20-summit-20101024

    That cap was probably too high. But at least the Obama administration showed some realization that global trade was exhibiting serious unpredicted problems. Too bad that Hillary Clinton could not have internalized that realization enough to campaign on revamping problematic trade treaties. (And persuaded a few more of the voters in the RUST BELT to vote for her.) Elections have consequences and voters understand that, but what choice did they have?

    In your world, while American corporations act out in ways that would be diagnosed as antisocial personality disorder in a human being, American human beings are expected to wait patiently for decades while global trade is slowly adjusted into some practical system. (As one shortcoming after another is addressed.)

    Antisocial personality disorder:
    "a personality disorder that is characterized by antisocial behavior exhibiting pervasive disregard for and violation of the rights, feelings, and safety of others "
    See: http://www.merriam-webster.com/dictionary/antisocial%20personality%20disorder#medicalDictionary

  5. Ray LaPan-Love November 29, 2016 1:01 pm

    Spencer,

    The article states almost exactly what you 'add' in your comment:

    "Imports and foreign production, therefore, have had an impact on manufacturing employment in the U.S. But several caveats should be raised. First, as Erik Brynjolfsson and Andrew McAfee of MIT and others have pointed out, technology has had a much larger effect on jobs".

    So, what gives? Is there an award today for who ever gets the biggest DUH??? If there is anything worth adding, it would be a mention of the Ball St study that supports the author's claim but is somehow overlooked. But your comment, well, DUH!!

    =================================================

    JimH,

    Some good stuff there, your assessment of Economics and its penchant for ignoring variables, and your insight which states that "studies can assume that we are one contiguous job market", is all very true, and especially when it comes to immigration issues. I've lived most of my life near the Southern border and when economists claim that undocumented workers are good for our economy I can only chuckle and shake my head. I suppose I could also list all of the variables which those economists ignore, and there are many to choose from, but, there is that quote by Upton Sinclair: "You can't get a man to understand what his salary depends on his not understanding".

    In all fairness though, The Dept. of Labor does of course have its JOLTS data, and so not all such studies are based on broad assumptions, but Economics does have its blind spots, generally speaking. And of course economists apply far too much effort and energy serving their political and financial masters.

    As for your comment in regards to the the trade deficit, you might want to read up a little on the Triffin Dilemma. The essence of globalization has a lot to do with the US leadership choosing to maintain the reserve-currency status and Triffin showed that an increasing amount of dollars must supply the world's demand for dollars, or, global growth would falter. So, the trade deficit since 1975 has been intentional, for that reason, and others. Of course the cost of labor in the US was a factor too, and shipping and standards and so on. But, it is wise also, to remember that these choices were made at time, during and just after the Viet Nam war, when military recruitment was a very troubling issue for the leadership. And the option of good paying jobs for the working-class was very probably seen as in conflict with military recruitment. Accordingly, the working-class has been left with fewer options. This being accomplished in part with the historical anomaly of high immigration quotas, (and by the tolerance for illegal immigration), during periods with high unemployment, a falling participation-rate, inadequate infrastructure, and etc.

  6. Ray LaPan-Love November 29, 2016 2:18 pm

    JimH,

    After posting my earlier comment it occurred to me that I should have recommended an article by Tim Taylor that has some good info on the Triffin dilemma.

    http://conversableeconomist.blogspot.com/2013/11/the-triffin-dilemma-and-us-trade.html

    Also, it might be worth mentioning that you are making the common mistake of assigning blame to an international undertaking that would be more accurately assigned to national shortcomings. I'm referring here to what you quoted and said:

    ""Overall, most studies find evidence of positive net benefits from trade.""

    "Of course they do! And in your world, studies always Trump real world experience".

    My point being that "positive net benefits from trade" are based on just another half-baked measurement as you suggest, but the problems which result from trade-related displacements are not necessarily the fault of trade itself. There are in fact political options, for example, immigration could have been curtailed about 40 years ago and we would now have about 40 million fewer citizens, and thus there would almost certainly be more jobs available. Or, the laws pertaining to illegal immigration could have been enforced, or the 'Employee Free Choice Act could have been passed, or whatever, and then trade issues may have had much different impact.

  7. Ray LaPan-Love November 29, 2016 3:12 pm

    It seems worth mentioning here, that there are other more important goals that make globalization valuable than just matters of money or employment or who is getting what. Let us not forget the famous words of Immanuel Kant:

    "the spirit of commerce . . . sooner or later takes hold of every nation, and is incompatible with war."

  8. coberly November 29, 2016 6:33 pm

    Ray

    the spirit of commerce did not prevent WW1 or WW2.

    otherwise, thank you, and Jim H and Joseph Joyce for the first Post and Comments for grownups we've had around here in some time.

  9. Ray LaPan-Love November 29, 2016 7:03 pm

    Hey Coberly, long time no see.

    And yes, you are right, 'the spirit of commerce' theory has had some ups and downs. But, one could easily and accurately argue that the effort which began with the League of Nations, and loosely connects back to Kant's claim, has gained some ground since WW2. There has not, after-all, been a major war since.

    So, when discussing the pros and cons of globalization, that factor, as I said, is worthy of mention. And it was a key consideration in the formation of the Bretton Woods institutions, and in the globalization effort in general. This suggesting then that there are larger concerns than the unemployment-rate, or the wage levels, of the working-class folks who may, or may not, have been at the losing end of 'free-trade'.

    I've been a 'labor-lefty' since the 1970s, but I am still capable of understanding that things could have been much worse for the American working-class. Plus, if anyone must give up a job, who better than those with a fairly well-constructed safety-net. History always has its winners and losers, and progress rarely, if ever, comes in an even flow.

    Meanwhile, those living in extreme poverty, worldwide, have dropped from 40% in 1981, to about 10% in 2015 (World Bank), so, progress is occurring. But of course much of that is now being ignored by the din which has drowned out so many considerations that really do matter, and a great deal.

  10. coberly November 29, 2016 8:25 pm

    Ray

    I am inclined to agree with you, but sometimes it's hard to see the forest for the trees. Especially if one of those trees has fallen on you.

    In general I am more interested in stopping predatory business models that really hurt people than in creating cosmic justice.

    as for the relative lack of big wars since WW2, I always thought that was because of mutual assured destruction. I am sure Vietnam looked like a big enough war to the Vietnamese.

[Nov 30, 2016] How the Global Left Destroyed Itself

Notable quotes:
"... Each of these was based fundamentally upon the principle that language was the key to all power. That is, that language was not a tool that described reality but the power that created it, and s/he who controlled language controlled everything through the shaping of "discourse", as opposed to the objective existence of any truth at all ..."
"... When you globalise capital, you globalise labour. That meant jobs shifting from expensive markets to cheap. Before long the incomes of those swimming in the stream of global capital began to seriously outstrip the incomes of those trapped in old and withering Western labour markets. As a result, inflation in those markets also began to fall and so did interest rates. Thus asset prices took off as Western nation labour markets got hollowed out, and standard of living inequality widened much more quickly as a new landed aristocracy developed. ..."
"... With a Republican Party on its knees, Obama was positioned to restore the kind of New Deal rules that global capitalism enjoyed under Franklin D. Roosevelt. ..."
"... But instead he opted to patch up financialised capitalism. The banks were bailed out and the bonus culture returned. Yes, there were some new rules but they were weak. There was no seizing of the agenda. No imprisonments of the guilty. The US Department of Justice is still issuing $14bn fines to banks involved yet still today there is no justice. Think about that a minute. How can a crime be worthy of a $14bn fine but no prison time?!? ..."
"... Alas, for all of his efforts to restore Wall Street, Obama provided no reset for Main Street economics to restore the fortunes of the US lower classes. Sure Obama fought a hostile Capitol but, let's face it, he had other priorities. ..."
"... This comment is a perfect example of the author's (and Adolf Reed's) point: that the so-called "Left" is so bogged down in issues of language that it has completely lost sight of class politics. ..."
"... It's why Trump won. He was a Viking swinging an ax at nuanced hair-splitters. It was inelegant and ugly, but effective. We will find out if the hair-splitters win again in their inner circle with the Democratic Minority Leader vote. I suspect they missed the point of the election and will vote Pelosi back in, thereby missing the chance for significant gains in the mid-term elections. ..."
"... One of the great triumphs of Those Who Continue To Be Our Rulers has been the infiltration and cooptation of 'the left', hand in hand with the 'dumbing down' of the last 30+ years so few people really understand what is going on. ..."
"... That the Global Left appears to be intellectually weak regarding identity politics and "political correctness" vs. class politics, there is no doubt. But to skim over Global Corporate leverage of this attitude seems wrong to me. The right has also embraced identity politics in order to keep the 90% fully divided in order to justify it's continual economic rape of both human and physical ecology. ..."
"... Every "identity politics" charge starts here, with one group wanting a more equitable social order and the other group defending the existing power structure. Identity politics is adjusting the social order and rattling the power structure, which is why it is so effective. ..."
"... I think it can be effectively argued that Trump voters in PA, WI, OH, MI chose to rattle the power structure and you could think of that as identity politics as well. ..."
"... On the contrary, the (Neo-)Liberal establishment uses identity politics to co-opt and neutralise the left. It keeps them occupied without threatening the real power structure in the least. ..."
"... Hillary (Neoliberal establishment) has many supporters who think of themselves as 'left' or 'liberal'. The Democratic Party leadership is neither 'left' nor 'liberal'. It keeps the votes and the love of the 'liberals' by talking up harmless 'liberal' identity politics and soft peddling the Liberal power politics which they are really about. ..."
"... Just from historical perspective, the right wing had more money to forward its agenda and an OCD like affliction [biblical] to drive simple memes relentlessly via its increasing private ownership of education and media. Thereby creating an institutional network over time to gain dominate market share in crafting the social narrative. Bloodly hell anyone remember Bush Jr Christian crusade after politicizing religion to get elected and the ramifications – neocon – R2P thingy . ..."
"... Its not hard once neoliberalism became dominate in the 70s [wages and productivity diverged] the proceeds have gone to the top and everyone else got credit IOUs based mostly on asset inflation via the Casino or RE [home and IP]. ..."
"... Foucault in particular advanced a greatly expanded wariness regarding the use of power. It was not just that left politics could only lead to ossified Soviet Marxism or the dogmatic petty despotism of the left splinters. Institutions in general mapped out social practices and attendant identities to impose on the individual. His position tended to promote a distrust not only of "grand narratives" but of organizational bonds as such. As far as I can tell, the idea of people joining together to form an institution that would enhance their social power as well as allow them to become personally empowered/enhanced was something of a categorial impossibility. ..."
"... There is no global left. We have only global state capitalists and global social democrats – a pseudo left. The countries where Marxist class analysis was supposedly adopted were not industrial countries where "alienation" had brought the "proletariat" to an inevitable communal mentality. The largest of these countries killed millions in order to industrialize rapidly – pretending the goal was to get to that state. ..."
"... Bigotry. Identity centered thinking. Neither serves egalitarianism. But people cling to them. "I gotta look out for myself first." And so called left thinkers constantly pontificate about "benefits" and "privileges" that some class, sex, and race confer. Hmmm. The logic is that many of us struggling daily to keep our jobs and pay the bills must give up something in order to be fair, in order to build a better society. Given this thinking it is no surprise that so many have retreated into the illusion of safety offered by identity based thinking. ..."
"... "Simultaneously, capitalism did what it does best. It packaged and repackaged, branded and rebranded every emerging identity, cloaked in its own sub-cultural nomenclature, selling itself back to new emerging identities. Soon class was completely forgotten as the global Left dedicated itself instead to policing the commons as a kind of safe zone for a multitude of difference that capitalism turned into a cultural supermarket." ..."
"... But why does the Dem estab embrace the conservative neoliberal agenda? The Dem estab are smart people, can think on multiple levels, are not limited in scope, are not racist. So, why then does the Dem estab accept and promote the conservative GOP neoliberal economic agenda? ..."
"... Because the Dem estab isn't very smart. ..."
"... Conservative is: private property, capitalism, limited taxes and transfer payments plus national security and religion. ..."
"... Liberalism is not in opposition to any of that. Identity politics arose at the same time the Ds were purging the reds (socialists and communists) from their party. Liberalism/progressivism is an ameliorating position of conservatism (progressive support of labor unions to work within a private property/corporatist structure not to eliminate the system and replace it with public/employee ownership) Not too far, too fast, maybe toss out a few more crumbs. ..."
"... There is a foundation for identity politics on the liberal-left (see what I did there?) – it rests in the sense of moral superiority of just this liberal-left, which superiority is then patronisingly spread all over the social world – until it meets those who deny the moral superiority claim, whereupon it becomes murderous (in, of course, the name of humanity and humanitarianism). ..."
"... This is why the 1% continue to prevail over the 99%. If the 1% wasn't so incompetent this would continue forever. They know how to divide, conquer and rule the 99%, however they don't know how to run a society in a sustainable way. ..."
"... But I will say one thing for the Right over the Left: they have taken the initiative and are now the sole force for change. Granted, supporting a carnival barker for president is an act of desperation. Nevertheless he was the only option for change and the Right took it. Perhaps the Left offering little to nothing in the way of change reflects its lack of desperation. ..."
"... Excellent comment, EoinW! You just summed up years of content and commentary on this site. Obviously as the "Left" continues to defend the status quo as you describe it stops being "Left" in any meaningful way anymore. ..."
"... The Koch brothers are economically to the very right. They are socially to the left, perhaps even more socially liberal than many of your liberal friends. No joke. There's a point here, if I can figure out what it is. ..."
"... Trump isn't Right or Left. Trump is a can of gasoline and a match. His voters weren't voting for a Left or Right agenda. They were voting for a battering ram. That is why he got a pass on racist, misogynist, fascist statements that would have killed any other candidate. ..."
"... PC is a parody of the 20th Century reform movements. ..."
"... In the 70's the feminists worked against legal disabilities written into law. Since the Depression, the unions fought corporate management create a livable relationship between management and labor. Real struggles, real problems, real people. ..."
"... What's interesting is that in an article pushing class over identity. he never tried to set his class ethos in order to convince working class people or the bourgeoisie why they should listen to him. ..."
"... "This site, along with the MSM, has flown way off the handle since the election loss." ..."
"... "Our nation's problems can be remedied with one dramatic change" ..."
"... Bringing C level pay packages at major corporations in line with the real contributions of the recipients would be great. How would we do it? With laws or regulations or executive orders banning the federal government from doing business with any firm that failed to comply with some basic guidelines? ..."
"... It's an academic point right now in any event. The Trump administration – working together with the Ryan House – is not going to make legislation or sign executive orders to do anything remotely like this. Which is one of the many reasons why bashing Democrats has taken off here I suspect. This election was theirs to lose, and they did everything in their power to toss it. ..."
"... You do realize that the wealthy are both part of and connected to the legislative branch of every single country on this planet right? As long as that remains so (as it has since the dawn of humans) then good luck trying to cap any sort of hording behavior of the wealthy. ..."
"... The post-structural revolution transpired [in the U.S.] before and during the end of the Cold War just as the collapse of the Old Soviet Union denuded the global Left of its raison detre. ..."
"... Foucault was not entirely sympathetic to the Left, at least the unions, but he was trying to articulate a politics that was just as much about liberation from capitalism as classic Marxism. To that end, discourse analysis was the means to discovering those subtle articulations of power in human relations, not an end in itself as it was for, say, Barthes. ..."
"... Imagine inequality plotted on two axes. Inequality between genders, races and cultures is what liberals have been concentrating on. This is the x-axis and the focus of identity politics and the liberal left. ..."
"... On the y-axis we have inequality from top to bottom. 2014 – "85 richest people as wealthy as poorest half of the world" 2016– "Richest 62 people as wealthy as half of world's population" ..."
"... The neoliberal view L As long as everyone, from all genders, races and cultures, is visiting the same food bank this is equality. ..."
"... You can see why liberals love identity politics. ..."
"... labor is being co-opted by the right: the Republican Workers Party I think this rhymes with Fascist. But then, in a world soon to be literally scrambling for high ground and rebuilding housing for 50 million people the time honored "worker" might actually have a renaissance. ..."
"... But the simple act of writing checks cost me n-o-t-h-i-n-g in terms of time, energy, education, physical or mental exertion. ..."
"... A much more nuanced discussion of the primacy of identity politics on the Left in Britain and the US is http://www.counterpunch.org/2016/11/29/prospects-for-an-alt-left/ "Prospects for an Alt-Left," November 29, 2016, by Elliot Murphy, who teaches in the Division of Psychology and Language Sciences at University College, London. ..."
"... The electorate is angry (true liberals at the Dems, voters in select electoral states at "everything"). If democracy is messy, then that's what we've got; a mess. Unfortunately, it's coming at the absolutely wrong time (Climate Change, lethal policing, financial elite impunity). ..."
"... But certainly the fall of the USSR was the thing that forced capitalism's hand. At that point capitalism had no choice but to step up and prove that it could really bring a better life to the world. ..."
"... A Minsky event of biblical proportions soon followed (it only took about 10 years!) and now all is devastation and nobody has clue. But the 1990 effort could have been in earnest. Capitalists mean well but they are always in denial about the inequality they create which finally started a chain reaction in "identity politics" as reactions to the stress of economic competition bounced around in every society like a pinball machine. A tedious and insufferable game which seems to have culminated in Hillary the Relentless. I won't say capitalism is idiotic. But something is. ..."
"... Left and Right only really make sense in the context of the distribution of power and wealth, and only when there is a difference between them about that distribution. This was historically the case for more than 150 years after the French Revolution. By the mid-1960s, there was a sense that the Left was winning, and would continue to win. Progressive taxation, zero unemployment, little real poverty by today's standards, free education and healthcare . and many influential political figures (Tony Crosland for example) saw the major task of the future as deciding where the fruits of economic growth could be most justly applied. ..."
"... So until class-based politics and struggles over power and money re-start (if they ever do) I respectfully suggest that "Left" and "Right" be retired as terms that no longer have any meaning. ..."
"... powerlessness, of course, corrupts. There's always someone weaker than you, which is why identity politics is essentially a conservative, disciplining force, with a vested interest in the problems it has chosen to identify ..."
"... Identity politics is a disaster ongoing for the Democratic Party, for reasons they seem to have overlooked. First, the additional identity group is white. We already see this in the South, where 90% of the white population in many states votes Republican. ..."
"... When that spreads to the rest of the country, there will be a permanent Republican majority until the Republicans create a new major disaster. ..."
"... So soon we forget the Battle of Seattle. The Left has been opposed to globalization, deregulation, etc., all along. Partly he's talking about an academic pseudo-left, partly confusing the left with the Democrats and other "center-left," captured parties. ..."
"... I mean, Barack Obama was our first black president, but most blacks didn't do very well. George W. Bush was our first retard president, and most people with cognitive handicaps didn't do very well. ..."
"... But we can boil it all down to something even simpler and more primal: divide and conquer. ..."
Nov 29, 2016 | www.nakedcapitalism.com
Yves here. This piece gives a useful, real-world perspective on the issues discussed in a seminal Adolph Reed article . Key section:

race politics is not an alternative to class politics; it is a class politics, the politics of the left-wing of neoliberalism. It is the expression and active agency of a political order and moral economy in which capitalist market forces are treated as unassailable nature. An integral element of that moral economy is displacement of the critique of the invidious outcomes produced by capitalist class power onto equally naturalized categories of ascriptive identity that sort us into groups supposedly defined by what we essentially are rather than what we do. As I have argued, following Walter Michaels and others, within that moral economy a society in which 1% of the population controlled 90% of the resources could be just, provided that roughly 12% of the 1% were black, 12% were Latino, 50% were women, and whatever the appropriate proportions were LGBT people. It would be tough to imagine a normative ideal that expresses more unambiguously the social position of people who consider themselves candidates for inclusion in, or at least significant staff positions in service to, the ruling class.

This perspective may help explain why, the more aggressively and openly capitalist class power destroys and marketizes every shred of social protection working people of all races, genders, and sexual orientations have fought for and won over the last century, the louder and more insistent are the demands from the identitarian left that we focus our attention on statistical disparities and episodic outrages that "prove" that the crucial injustices in the society should be understood in the language of ascriptive identity.

My take on this issue is that the neoliberal use of identity politics continue and extends the cultural inculcation of individuals seeing themselves engaging with other in one-to-one transactions (commerce, struggles over power and status) and has the effect of diverting their focus and energy on seeing themselves as members of groups with common interests and operating that way, and in particular, of seeing the role of money and property, which are social constructs, in power dynamics.

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific's leading geo-politics website. Originally posted at MacroBusiness

Let's begin this little tale with a personal anecdote. Back in 1990 I met and fell in love with a bisexual, African American ballerina. She was studying Liberal Arts at US Ivy League Smith College at the time (which Aussies may recall was being run by our Jill Kerr Conway back then). So I moved in with my dancing beauty and we lived happily on her old man's purse for a year.

I was fortunate to arrive at Smith during a period of intellectual tumult. It was the early years of the US political correctness revolution when the academy was writhing through a post-structuralist shift. Traditional dialectical history was being supplanted by a new suite of studies based around truth as "discourse". Driven by the French post-modern thinkers of the 70s and 80s, the US academy was adopting and adapting the ideas Foucault, Derrida and Barthe to a variety of civil rights movements that spawned gender and racial studies.

Each of these was based fundamentally upon the principle that language was the key to all power. That is, that language was not a tool that described reality but the power that created it, and s/he who controlled language controlled everything through the shaping of "discourse", as opposed to the objective existence of any truth at all .

... ... ...

The post-structural revolution transpired before and during the end of the Cold War just as the collapse of the Old Soviet Union denuded the global Left of its raison detre. But its social justice impulse didn't die, it turned inwards from a notion of the historic inevitability of the decline of capitalism and the rise of oppressed classes, towards the liberation of oppressed minorities within capitalism, empowered by control over the language that defined who they were.

Simultaneously, capitalism did what it does best. It packaged and repackaged, branded and rebranded every emerging identity, cloaked in its own sub-cultural nomenclature, selling itself back to new emerging identities. Soon class was completely forgotten as the global Left dedicated itself instead to policing the commons as a kind of safe zone for a multitude of difference that capitalism turned into a cultural supermarket.

As the Left turned inwards, capitalism turned outwards and went truly, madly global, lifting previously isolated nations into a single planet-wide market, pretty much all of it revolving around Americana replete with its identity-branded products.

But, of course, this came at a cost. When you globalise capital, you globalise labour. That meant jobs shifting from expensive markets to cheap. Before long the incomes of those swimming in the stream of global capital began to seriously outstrip the incomes of those trapped in old and withering Western labour markets. As a result, inflation in those markets also began to fall and so did interest rates. Thus asset prices took off as Western nation labour markets got hollowed out, and standard of living inequality widened much more quickly as a new landed aristocracy developed.

Meanwhile the global Left looked on from its Ivory Tower of identity politics and was pleased. Capitalism was spreading the wealth to oppressed brothers and sisters, and if there were some losers in the West then that was only natural as others rose in prominence. Indeed, it went further. So satisfied was it with human progress, and so satisfied with its own role in producing it, that it turned the power of language that it held most dear back upon those that opposed the new order. Those losers in Western labour markets that dared complain or fight back against the free movement of capital and labour were labelled and marginalised as "racist", "xenophobic" and "sexist".

This great confluence of forces reached its apogee in the Global Financial Crisis when a ribaldly treasonous Wall St destroyed the American financial system just as America's first ever African American President, Barack Obama, was elected . One might have expected this convergence to result in a revival of some class politics. Obama ran on a platform of "hope and change" very much cultured in the vein of seventies art and inherited a global capitalism that had just openly ravaged its most celebrated host nation.

But alas, it was just a bit of "retro". With a Republican Party on its knees, Obama was positioned to restore the kind of New Deal rules that global capitalism enjoyed under Franklin D. Roosevelt. A gobalisation like the one promised in the brochures, that benefited the majority via competition and productivity gains, driven by trade and meritocracy, with counter-balanced private risk and public equity.

But instead he opted to patch up financialised capitalism. The banks were bailed out and the bonus culture returned. Yes, there were some new rules but they were weak. There was no seizing of the agenda. No imprisonments of the guilty. The US Department of Justice is still issuing $14bn fines to banks involved yet still today there is no justice. Think about that a minute. How can a crime be worthy of a $14bn fine but no prison time?!?

Alas, for all of his efforts to restore Wall Street, Obama provided no reset for Main Street economics to restore the fortunes of the US lower classes. Sure Obama fought a hostile Capitol but, let's face it, he had other priorities. And so the US working and middle classes, as well as those worldwide, were sold another pup. Now more than ever, if they said say so they were quickly shut down as "racist", "xenophobic", or "sexist".

Thus it came to pass that the global Left somehow did a complete back-flip and positioned itself directly behind the same unreconstructed global capitalism that was still sucking the life from the lower classes that it always had. Only now it was doing so with explicit public backing and with an abandon it had not enjoyed since the roaring twenties.

Which brings us back to today. And we wonder how it is that an abuse-spouting guy like Donald Trump can succeed Barack Obama. Trump is a member of the very same "trickle down" capitalist class that ripped the income from US households. But he is smart enough, smarter than the Left at least, to know that the decades long rage of the middle and working classes is a formidable political force and has tapped it spectacularly to rise to power.

And, he has done more. He has also recognised that the Left's obsession with post-structural identity politics has totally paralysed it. It is so traumatised and pre-occupied by his mis-use of the language of power – the "racist", "sexist" and "xenophobic" comments – that it is further wedging itself from its natural constituents every day.

Don't get me wrong, I am very doubtful that Trump will succeed with his proposed policies but he has at least mentioned the elephant in the room, making the American worker visible again.

Returning to that innocent Aussie boy and his wild romp at Smith College, I might ask what he would have made of all of this. None of the above should be taken as a repudiation of the experience of racism or sexism. Indeed, the one thing I took away from Smith College over my lifetime was an understanding at just how scarred by slavery are the generations of African Americans that lived it and today inherit its memory (as well as other persecuted). I felt terribly inadequate before that pain then and I remain so today.

But, if the global Left is to have any meaning in the future of the world, and I would argue that the global Right will destroy us all if it doesn't, then it must get beyond post-structural paralysis and go back to the future of fighting not just for social justice issues but for equity based upon class. Empowerment is not just about language, it's about capital, who's got it, who hasn't and what role government plays between them.

All sex is not rape, but most poverty is.

Big River Bandido November 29, 2016 at 1:28 pm

This comment is a perfect example of the author's (and Adolf Reed's) point: that the so-called "Left" is so bogged down in issues of language that it has completely lost sight of class politics. Essentially, the comment vividly displays the exact methodology the author lambasts in the piece - it hijacks the discussion about an economic issue, attempts to turn it into a mere distraction about semantics, and in the end contributes absolutely nothing of substance to the "discourse".

rd November 29, 2016 at 4:55 pm

It's why Trump won. He was a Viking swinging an ax at nuanced hair-splitters. It was inelegant and ugly, but effective. We will find out if the hair-splitters win again in their inner circle with the Democratic Minority Leader vote. I suspect they missed the point of the election and will vote Pelosi back in, thereby missing the chance for significant gains in the mid-term elections.

Dave Patterson November 29, 2016 at 7:00 am

One of the great triumphs of Those Who Continue To Be Our Rulers has been the infiltration and cooptation of 'the left', hand in hand with the 'dumbing down' of the last 30+ years so few people really understand what is going on.

Explained in more detail here if anyone interested in some truly 'out of the box' perspectives – It's not 'the left' trying to take over the world and shut down free speech and all that other bad stuff – it's 'the right'!! http://tinyurl.com/h4h2kay .

JCC November 29, 2016 at 9:01 am

Although I haven't yet read the article you posted, my "feeling" as I read this was that the author inferred that the right was in the mix somehow, but it was primarily the fault of the left.

That the Global Left appears to be intellectually weak regarding identity politics and "political correctness" vs. class politics, there is no doubt. But to skim over Global Corporate leverage of this attitude seems wrong to me. The right has also embraced identity politics in order to keep the 90% fully divided in order to justify it's continual economic rape of both human and physical ecology.

anonymouse November 29, 2016 at 10:15 am

>The right has also embraced identity politics

So many people critiquing the Dems' use of identity politics seem to miss this point.

Art Eclectica November 29, 2016 at 11:23 am

Exactly. My guess is that this plays out somewhat like this:

Dems: This group _____ should be free to have _____ civil right.

Reps: NO. We are a society built on _____ tradition, no need to change that because it upends our patriarchal, Christian, Caucasian power structure.

Every "identity politics" charge starts here, with one group wanting a more equitable social order and the other group defending the existing power structure. Identity politics is adjusting the social order and rattling the power structure, which is why it is so effective.

I think it can be effectively argued that Trump voters in PA, WI, OH, MI chose to rattle the power structure and you could think of that as identity politics as well.

Grebo November 29, 2016 at 5:41 pm

Identity politics is adjusting the social order and rattling the power structure, which is why it is so effective.

On the contrary, the (Neo-)Liberal establishment uses identity politics to co-opt and neutralise the left. It keeps them occupied without threatening the real power structure in the least.

jrs November 29, 2016 at 5:57 pm

When have they ever done any such thing? Vote for Hillary because she's a woman isn't even any kind of politics it's more like marketing branding. It's the real thing. Taste great, less filling. I'm loving it.

Grebo November 29, 2016 at 8:04 pm

Hillary (Neoliberal establishment) has many supporters who think of themselves as 'left' or 'liberal'. The Democratic Party leadership is neither 'left' nor 'liberal'. It keeps the votes and the love of the 'liberals' by talking up harmless 'liberal' identity politics and soft peddling the Liberal power politics which they are really about.

They exploit the happy historical accident of the coincidence of names. The Liberal ideology was so called because it was slightly less right-wing than the Feudalism it displaced. In today's terms however, it is not very liberal, and Neoliberalism is even less so.

Paul Art November 29, 2016 at 7:14 am

If I was in charge of the DNC and wanted to commission a very cleverly written piece to exonerate the DLC and the New Democrats from the 30 odd years of corruption and self-aggrandizement they indulged in and laughed all the way to the Bank then I would definitely give this chap a call. I mean, where do we start? No attempt at learning the history of neoliberalism, no attempt at any serious research about how and why it fastened itself into the brains of people like Tony Coelho and Al From, nothing, zilch. If someone who did not know the history of the DLC read this piece, they would walk away thinking, 'wow, it was all happenstance, it all just happened, no one deliberately set off this run away train'. Sometime in the 90s the 'Left' decided to just pursue identity politics. Amazing. I would ask the Author to start with the Powell memo and then make an investigation as to why the Democrats then and the DLC later decided to merely sit on their hands when all the forces the Powell memo unleashed proceeded to wreak their havoc in every established institution of the Left, principally the Universities which had always been the bastion of the Progressives. That might be a good starting point.

skippy November 29, 2016 at 7:38 am

My response at MB

Sigh . the left was marginalized and relentlessly hunted down by the right [grab bag of corporatists, free marketers, neocons, evangelicals, and a whole cornucopia of wing nut ideologists (file under creative class gig writers)].

Just from historical perspective, the right wing had more money to forward its agenda and an OCD like affliction [biblical] to drive simple memes relentlessly via its increasing private ownership of education and media. Thereby creating an institutional network over time to gain dominate market share in crafting the social narrative. Bloodly hell anyone remember Bush Jr Christian crusade after politicizing religion to get elected and the ramifications – neocon – R2P thingy .

Its not hard once neoliberalism became dominate in the 70s [wages and productivity diverged] the proceeds have gone to the top and everyone else got credit IOUs based mostly on asset inflation via the Casino or RE [home and IP].

...

flora November 29, 2016 at 8:12 am

Yes, it's interesting that the academic "left" (aka liberals), who so prize language to accurately, and to the finest degree distinguish 'this' from 'that', have avoided addressing the difference between 'left' and 'liberal' and are content to leave the two terms interchangable.

JTFaraday November 29, 2016 at 11:28 am

The reason for that is that when academic leftists attempted a more in depth critique, of one sort or another, of the actually existing historical liberal welfare state, the liberals threw the "New Deal-under-siege" attack at them and attempted to shut them down.

There is very little left perspective in public. All this whining about identity politics is not left either. It is reactionary. I can think of plenty of old labor left academics who have done a much better job of wrapping their minds around why sex, gender, and race matter with respect to all matters economic than this incessant childish whine. The "let me make you feel more comfortable" denialism of Uncle Tom Reed.

Right now, I would say that these reactionaries don't want to hear from the academic left any more than New Deal liberals did. Not going to stop them from blaming them for all their problems though.

Maybe people should shoulder their own failures for a change. As for the Trumpertantrums, I am totally not having them.

hemeantwell November 29, 2016 at 5:31 pm

Since the writer led off talking about an academic setting, it would be useful to flesh out a bit more how trends in academic theoretical discussion in the 70s and 80s reflected and reinforced what was going on politically. He refers to postructuralism, which was certainly involved, but doesn't give enough emphasis to how deliberately poststructuralists - and here I'm lumping together writers like Lyotard, Foucault, and Deleuze and Guattari - were all reacting to the failure of French Maoism and Trotskyism to, as far as they were concerned, provide a satisfactory alternative to Soviet Marxism.

As groups espousing those position flailed about in the 70s, the drive to maintain hope in revolutionary prospects in the midst of macroeconomic stabilization and union reconciliation to capitalism frequently brought out the worst sectarian tendencies. While writers like Andre Gorz bid adieu to the proletariat as an agent of change and tried to tread water as social democratic reformists, the poststructuralists disjoined the critique of power from class analysis.

Foucault in particular advanced a greatly expanded wariness regarding the use of power. It was not just that left politics could only lead to ossified Soviet Marxism or the dogmatic petty despotism of the left splinters. Institutions in general mapped out social practices and attendant identities to impose on the individual. His position tended to promote a distrust not only of "grand narratives" but of organizational bonds as such. As far as I can tell, the idea of people joining together to form an institution that would enhance their social power as well as allow them to become personally empowered/enhanced was something of a categorial impossibility.

When imported to US academia, traditionally much more disengaged from organized politics than their European counterparts, these tendencies flourished. Aside from being socially cut off from increasingly anodyne political organizations, poststructuralists in the US often had backgrounds with little orientation to history or social science research addressing class relations. To them the experience of a much more immediate and palpable form of oppression through the use of language offered an immediate critical target. This dovetailed perfectly with the legalistic use of state power to end discrimination against various groups, A European disillusionment with class politics helped to fortify an American evasion or ignorance of it.

ejp November 29, 2016 at 7:41 am

There is no global left. We have only global state capitalists and global social democrats – a pseudo left. The countries where Marxist class analysis was supposedly adopted were not industrial countries where "alienation" had brought the "proletariat" to an inevitable communal mentality. The largest of these countries killed millions in order to industrialize rapidly – pretending the goal was to get to that state.

The terms left and right may not be adequate for those of us who want an egalitarian society but also see many of the obstacles to egalitarianism as human failings that are independent of and not caused by ruling elites – although they frequently serve the interests of those elites.

Bigotry. Identity centered thinking. Neither serves egalitarianism. But people cling to them. "I gotta look out for myself first." And so called left thinkers constantly pontificate about "benefits" and "privileges" that some class, sex, and race confer. Hmmm. The logic is that many of us struggling daily to keep our jobs and pay the bills must give up something in order to be fair, in order to build a better society. Given this thinking it is no surprise that so many have retreated into the illusion of safety offered by identity based thinking.

Hopefully those of us who yearn for an egalitarian movement can develop and articulate an alternate view of reality.

flora November 29, 2016 at 8:04 am

"Simultaneously, capitalism did what it does best. It packaged and repackaged, branded and rebranded every emerging identity, cloaked in its own sub-cultural nomenclature, selling itself back to new emerging identities. Soon class was completely forgotten as the global Left dedicated itself instead to policing the commons as a kind of safe zone for a multitude of difference that capitalism turned into a cultural supermarket."


"Meanwhile the global Left looked on from its Ivory Tower of identity politics and was pleased. Capitalism was spreading the wealth to oppressed brothers and sisters, and if there were some losers in the West then that was only natural as others rose in prominence. Indeed, it went further. So satisfied was it with human progress, and so satisfied with its own role in producing it, that it turned the power of language that it held most dear back upon those that opposed the new order. Those losers in Western labour markets that dared complain or fight back against the free movement of capital and labour were labelled and marginalised as "racist", "xenophobic" and "sexist". "

Great post. Thanks.

JTFaraday November 29, 2016 at 11:40 am

That is not it at all. The real reason is the right wing played white identity politics starting with the southern strategy, and those running into the waiting arms of Trump today, took the poisoned bait. Enter Bill Clinton.

People need to start taking responsibility for their own actions, and stop blaming the academics and the leftists and the wimmins and the N-ers.

JTFaraday November 29, 2016 at 12:01 pm

And THAT is why "race" has a primary place in American political discourse, however maladaptive a response today's D-Party partisans may present.

Conservatives put over their neoliberal agenda BECAUSE RACISM.

flora November 29, 2016 at 12:15 pm

But why does the Dem estab embrace the conservative neoliberal agenda? The Dem estab are smart people, can think on multiple levels, are not limited in scope, are not racist. So, why then does the Dem estab accept and promote the conservative GOP neoliberal economic agenda?

UserFriendly November 29, 2016 at 1:23 pm

Because the Dem estab isn't very smart. I doubt more than half of them could define neoliberalism much less describe how it has destroyed the country. They are mostly motivated by the identity politics aspects.

Propertius November 29, 2016 at 3:56 pm

Because the Dem estab isn't very smart.

No, but they make up for it with arrogance.

Waldenpond November 29, 2016 at 5:28 pm

Conservative is: private property, capitalism, limited taxes and transfer payments plus national security and religion.

Liberalism is not in opposition to any of that. Identity politics arose at the same time the Ds were purging the reds (socialists and communists) from their party. Liberalism/progressivism is an ameliorating position of conservatism (progressive support of labor unions to work within a private property/corporatist structure not to eliminate the system and replace it with public/employee ownership) Not too far, too fast, maybe toss out a few more crumbs.

witters November 29, 2016 at 6:00 pm

There is a foundation for identity politics on the liberal-left (see what I did there?) – it rests in the sense of moral superiority of just this liberal-left, which superiority is then patronisingly spread all over the social world – until it meets those who deny the moral superiority claim, whereupon it becomes murderous (in, of course, the name of humanity and humanitarianism).

EoinW November 29, 2016 at 8:09 am

We live in a society where no one gets what they want. The Left sees the standard of living fall and is powerless to stop it. The Right see the culture war lost 25 years ago and can't even offer a public protest, let alone move things in a conservative direction. Instead we get the agenda of the political Left to sell out at every opportunity. Plus we get the agenda of the political Right of endless war and endless security state. Eventually the political Left and Right merge and support the exact same things. Now when will the real Left and Right recognize their true enemy and join forces against it? This is why the 1% continue to prevail over the 99%. If the 1% wasn't so incompetent this would continue forever. They know how to divide, conquer and rule the 99%, however they don't know how to run a society in a sustainable way.

But I will say one thing for the Right over the Left: they have taken the initiative and are now the sole force for change. Granted, supporting a carnival barker for president is an act of desperation. Nevertheless he was the only option for change and the Right took it. Perhaps the Left offering little to nothing in the way of change reflects its lack of desperation.

After all, the Left won the culture war and continues to push its agenda to extremes(even though such extremes will guarantee a back lash that will send people running back to their closets to hide). The Left still has the MSM media on its side when it comes to cultural issues. Thus the Left is satisfied with the status quo, with gorging themselves on the crumbs which fall from the 1% table. Consequently, you not only have a political Left that has sold out, you also have the rest of the Left content to accept that sell out so long as they get their symbolic victories over their ancient enemy – the Right.

Until the Left recognize its true enemy, the fight will only come from the Right. During that process more people will filter from the Left to the Right as the latter will offer the only hope for change.

integer November 29, 2016 at 8:27 am

I think left and right as political shorthand is too limited. Perhaps the NC commentariat could define up and down versions of each of these political philosophies (ie. left and right) and start to take control of the framing. Hence we would have up-left, down-left, up-right, and down-right. I would suggest that up and down could relate to environmental viewpoints.

Just a thought that I haven't given much thought, but it would be funny (to me at least) to be able to quantify one's political stance in terms of radians.

Minnie Mouse November 29, 2016 at 1:46 pm

Left and Right are two wings on the same bird and the bird is a turkey. Where is the hard perpendicular?

Ed November 29, 2016 at 8:28 am

Excellent comment, EoinW! You just summed up years of content and commentary on this site. Obviously as the "Left" continues to defend the status quo as you describe it stops being "Left" in any meaningful way anymore.

Katharine November 29, 2016 at 9:19 am

This seems to assume that change is an intrinsic good, so that change produced by the right will necessarily be improvement. Unfortunately, change for the worse is probably more likely than change for the better under this regime. Equally unfortunately, we may have reached the point where that is the only thing that will make people reconsider what constitutes a just society and how to achieve it. In any case, this is where we are now.

flora November 29, 2016 at 10:06 am

The economic left sees its standard of living fall. The social right sees its cultural verities fall.

The Koch brothers are economically to the very right. They are socially to the left, perhaps even more socially liberal than many of your liberal friends. No joke. There's a point here, if I can figure out what it is.

susan the other November 29, 2016 at 1:06 pm

Gary Johnson claims the libertarian mantra is what I used to think was the liberal mantra: economically conservative, socially liberal.

flora November 29, 2016 at 2:07 pm

One of Koch brothers, David Koch, was the 1980 Libertarian Party's VP candidate.

Karl November 29, 2016 at 12:30 pm

"He [Trump] was the only option for change and the Right took it."

You forget Bernie. The Left tried, and Bernie bowed out, not wanting to be another "Nader" spoiler. Now, for 2020, the Left thinks it's the "their turn."

The problem is, the Left tends to blow it too (e.g. McGovern in 1972), in part because their "language" also exudes power and tends to alienate other, more moderate, parts of the coalition with arcane (and rather elitist) arguments from Derrida et. al.

Lambert Strether November 29, 2016 at 3:29 pm

> not wanting to be another "Nader" spoiler.

And a good thing, too.

rd November 29, 2016 at 5:05 pm

Trump isn't Right or Left. Trump is a can of gasoline and a match. His voters weren't voting for a Left or Right agenda. They were voting for a battering ram. That is why he got a pass on racist, misogynist, fascist statements that would have killed any other candidate.

Trump is starting out with some rallies in the near-future. The Republicans in Congress think they are going to play patty-cake on policy to push the Koch Brothers agenda. We are going to see a populist who promised jobs duke it out publicly with small government austerity deficit cutters. It will be interesting to see what happens when he calls out Republican Congressmen standing in the way of his agenda by name.

scraping_by November 29, 2016 at 8:48 am

PC is a parody of the 20th Century reform movements. I n the 60's the Black churches and the labor unions fought Jim Crow laws and explicit institutional discrimination. In the 70's the feminists worked against legal disabilities written into law. Since the Depression, the unions fought corporate management create a livable relationship between management and labor. Real struggles, real problems, real people.

[Tinfoil hat on)]

At the same time the reformist subset was losing themselves in style points, being 'nice', and passive aggressive intimidation, the corporate community was promoting the anti-government screech for the masses. That is, at the same time the people lost sight of government as their counterweight to capital, the left elite was becoming the vile joke Limbaugh and the other talk radio blowhards said they were. This may be coincidental timing, or their may be someone behind the French connection and Hamilton Fish touring college campuses in the 80's promoting subjectivism. It's true the question of 'how they feel' seems to loom large in discussions where social justice used to be.

[Tinfoil hat off]

There are many words but no communication between the laboring masses and the specialist readers. Fainting couch feminists have nothing to say to wives and mothers, the slippery redefinitions out of non-white studies turn off people who work for a living, and the promotion of smaller and more neurotic minorities are just more friction in a society growing steeper uphill.

Ulysses November 29, 2016 at 8:52 am

"She was studying Liberal Arts at US Ivy League Smith College at the time (which Aussies may recall was being run by our Jill Kerr Conway back then). So I moved in with my dancing beauty and we lived happily on her old man's purse for a year."

I hate to be overly pedantic, but Smith College is one of the historically female colleges known as the Seven Sisters: Barnard College, Bryn Mawr College, Mount Holyoke College, Radcliffe College, Smith College, Vassar College, and Wellesley College. While Barnard is connected to Columbia, and Radcliffe to Harvard, none of the other Sisters has ever been considered any part of the Ancient Eight (Ivy League) schools: Brown, Columbia, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton, and Yale.

I find it highly doubtful that someone, unaware of this elementary fact, actually lived off a beautiful bisexual black ballerina's (wonderful alliteration!) "old man's purse," for a full year in Northampton, MA. He may well have dated briefly someone like this, but it strains credulity that– after a full year in this environment– he would never have learned of the distinction between the Seven Sisters and the Ivy League.

The Trumpening November 29, 2016 at 9:24 am

The truth of the matter is not so important. The black ballerina riff had two functions. First it helped push an ethos for the author of openness and acceptance of various races and sexual orientations. This is a highly charged subject and so accusations of racism, etc, are never far away for someone pushing class over identity.

Second it served as a nice hook to get dawgs like me to read through the whole thing; which was a very good article. Kind of like the opening paragraph of a Penthouse Forum entry, I was hoping that the author would eventually elaborate on what happened when she pirouetted over him

What's interesting is that in an article pushing class over identity. he never tried to set his class ethos in order to convince working class people or the bourgeoisie why they should listen to him.

Ulysses November 29, 2016 at 10:10 am

I have never, ever known Brits to claim an "Oxbridge education" if they haven't attended either Oxford or Cambridge. Similarly, over several decades of knowing quite well many alumnae from Wellesley, Smith, etc. I have never once heard them speak of their colleges as "Ivy League."

I do get your point, however. Perhaps Mr. Llewellyn-Smith was deliberately writing for a non-U.S. audience, and chose to use "Ivy League" as synonymous with "prestigious." I have seen graduates of Stanford, for example, described as "Ivy Leaguers" in the foreign press.

PlutoniumKun November 29, 2016 at 10:31 am

I have never, ever known Brits to claim an "Oxbridge education" if they haven't attended either Oxford or Cambridge

As a graduate of OBU, I've heard it several times (but usually, it must be said, tongue in cheek).

7 November 29, 2016 at 9:54 am

Lisa gives a good tour

https://www.youtube.com/watch?v=hElhGMkRtyM

PlutoniumKun November 29, 2016 at 9:58 am

I think the gradual process whereby the left, or more specifically, the middle class left, have been consumed by an intellectually vacant went hand in hand with what I found the bizarre abandonment of interest by the left in economics and in public intellectualism. The manner in which the left simply surrendered the intellectual arguments over issues like taxes and privatisation and trade still puzzles me. I suspect it was related to a cleavage between middle class left wingers and working class activists. They simple stopped talking the same language, so there was nobody to shout 'stop' when the right simply colonised the most important areas of public policy and shut down all discussion.*

A related issue is I think a strong authoritarianist strain which runs through some identity politics. Its common to have liberals discuss how intolerant the religious or right wingers are of intellectual discussion, but even try to question some of of the shibboleths of gender/race discussions and you can immediately find yourself labelled a misogynist/homophobe/racist. Just see some of the things you can get banned from the Guardian CIF for saying.

LA Mike November 29, 2016 at 10:14 am

This site, along with the MSM, has flown way off the handle since the election loss. Democrat-bashing is the new pastime.

Our nation's problems can be remedied with one dramatic change:

Caps on executive gains in terms of multiples in both public and private companies of a big enough size. For example, the CEO at most can make 50 times the average salary. Something to that effect. And any net income gains at the end of the year that are going to be dispersed as dividends, must proportionally reach the internal laborers as well. Presto, a robust economy.

All employees must share in gains. You don't like it? Tough. The owner will still be rich.

Historically, executives topped out at 20-30 times average salary. Now it's normal for the number to reach 500-2,000. It's absurd. As if a CEO is manufacturing products, marketing, and selling them all by himself/herself. As if Tim Cook assembles iPhones and iMacs by hand and sells them. As if Leslie Moonves writes, directs, acts in, and markets each show.

Put the redistributive mechanism in the private sphere as well as in government. Then America will be great again.

integer November 29, 2016 at 10:22 am

"This site, along with the MSM, has flown way off the handle since the election loss."

I presume you forgot to add "in my opinion" to the end of this sentence.

"Our nation's problems can be remedied with one dramatic change"

Ha!

FluffytheObeseCat November 29, 2016 at 11:16 am

Bringing C level pay packages at major corporations in line with the real contributions of the recipients would be great. How would we do it? With laws or regulations or executive orders banning the federal government from doing business with any firm that failed to comply with some basic guidelines?

It's an academic point right now in any event. The Trump administration – working together with the Ryan House – is not going to make legislation or sign executive orders to do anything remotely like this. Which is one of the many reasons why bashing Democrats has taken off here I suspect. This election was theirs to lose, and they did everything in their power to toss it.

inhibi November 29, 2016 at 12:03 pm

You do realize that the wealthy are both part of and connected to the legislative branch of every single country on this planet right? As long as that remains so (as it has since the dawn of humans) then good luck trying to cap any sort of hording behavior of the wealthy.

Michael November 29, 2016 at 10:21 am

As someone who grew up in and participated in those discussions:

1) It was "women's studies" back then. "Gender studies" is actually a major improvement in how the issues are examined.

2) We'd already long since lost by then, and we were looking to make our own lives better. Creating a space where we could have good sex and a minimum of violence was better. Reagan's election, and his re-election, destroyed the Left.

3) We live in a both/and world.

Uahsenaa November 29, 2016 at 10:58 am

I feel like this piece could use the yellow waders as well. Instead of simply repeating myself every time these things come up, I proffer an annotation of a important paragraph, to give a sense of what bothers me here.

The post-structural revolution transpired [in the U.S.] before and during the end of the Cold War just as the collapse of the Old Soviet Union denuded the global Left of its raison detre. But its social justice impulse didn't die, [a certain, largely liberal tendency in the North American academy] turned inwards from a notion of the historic inevitability of the decline of capitalism and the rise of oppressed classes, towards the liberation of oppressed minorities within capitalism[, which, if you paid close attention to what was being called for, implied and sometimes even outright demanded clear restraints be placed upon the power of capital in order to meet those goals], empowered by control over the [images, public statements, and widespread ideologies–i.e. discourse {which is about more than just language}] that defined who they were.

The post-structural turn was just as much about Derrida at Johns Hopkins as it was about Foucault trying to demonstrate the subtle and not-so-subtle effects of power in the explicit context of the May '68 events in France. The economy ground to a halt, and at one point de Gaulle was so afraid of a violent revolution that he briefly left the country, leaving the government helpless to do much of anything, until de Gaulle returned shortly thereafter.

Foucault was not entirely sympathetic to the Left, at least the unions, but he was trying to articulate a politics that was just as much about liberation from capitalism as classic Marxism. To that end, discourse analysis was the means to discovering those subtle articulations of power in human relations, not an end in itself as it was for, say, Barthes.

A claim is being made here regarding the "global left" that clearly comes from a parochial, North American perspective. Indian academics, for one, never abandoned political economy for identity politics, especially since in India identity politics, religion, regionalism, castes, etc. were always a concern and remain so. It seems rather odd to me that the other major current in academia from the '90s on, namely postcolonialism, is entirely left out of this story, especially when critiques of militarism and political economy were at the heart of it.

The Trumpening November 29, 2016 at 11:36 am

The saddest point of the events of '68 is that looking back society has never been so equal as at that point in time. That was more or less the time of peak working class living standard relative to the wealthy classes. It is no accident, at least in my book, that these mostly bourgeois student activists have a tard at the end of their name in French: soixante-huitards.

In the Sixites the "Left" had control of the economic levers or power - and by Left I mean those interested in smaller differences between the classes. There is no doubt the Cold War helped the working classes as the wealthy knew it was in their interest to make capitalism a showcase of rough egalitarianism. But during the 60's the RIght held cultural sway. It was Berkeley pushing Free Speech and Lenny Bruce trying to break boundaries while the right tried to keep the Overton Window as tight and squeaky clean as possible.

But now the "Right" in the sense of those who want to increase the difference between rich and poor hold economic power while the Left police culture and speech. The provocateurs come from the right nowadays as they run roughshod over the PC police and try to smash open the racial, gender. and sexual orientation speech restrictions put in place as the left now control the Overton Window.

Sound of the Suburbs November 29, 2016 at 11:19 am

The Left and Liberal are two different things entirely.

In the UK we have three parties:

Labour – the left
Liberal – middle/ liberal
Conservative – the right

Mapping this across to the US:

Labour – X
Liberal – Democrat
Conservative – Republican

The US has been conned from the start and has never had a real party of the Left.

At the end of the 19th and beginning of the 20th Century US ideas changed and the view of those at the top was that it would be dangerous for the masses to get any real power, a liberal Democratic party would suffice to listen to the wants of the masses and interpret them in a sensible way in accordance with the interests of the wealthy.

We don't want the masses to vote for a clean slate redistribution of land and wealth for heaven's sake.

In the UK the Liberals were descendents of the Whigs, an elitist Left (like the US Democrats).

Once everyone got the vote, a real Left Labour party appeared and the Whigs/Liberals faded into insignificance.

It is much easier to see today's trends when you see liberals as an elitist Left.

They have just got so elitist they have lost touch with the working class.

The working class used to be their pet project, now it is other minorities like LGBT and immigration.

Liberals need a pet project to feel self-righteous and good about themselves but they come from the elite and don't want any real distribution of wealth and privilege as they and their children benefit from it themselves.

Liberals are the more caring side of the elite, but they care mainly about themselves rather than wanting a really fair society.

They call themselves progressive, but they like progressing very slowly and never want to reach their destination where there is real equality.

The US needs its version of the UK Labour party – a real Left – people who like Bernie Sanders way of thinking should start one up, Bernie might even join up.

In the UK our three parties all went neo-liberal, we had three liberal parties!

No one really likes liberals and they take to hiding in the other two parties, you need to be careful.

Jeremy Corbyn is taking the Labour party back where it belongs slowly.

left – traditional left
liberal – elitist left

Sound of the Suburbs November 29, 2016 at 11:22 am

Imagine inequality plotted on two axes. Inequality between genders, races and cultures is what liberals have been concentrating on. This is the x-axis and the focus of identity politics and the liberal left.

On the y-axis we have inequality from top to bottom. 2014 – "85 richest people as wealthy as poorest half of the world" 2016– "Richest 62 people as wealthy as half of world's population"

Doing the maths and assuming a straight line .
5.4 years until one person is as wealthy as poorest half of the world.

This is what the traditional left normally concentrate on, but as they have switched to identity politics this inequality has gone through the roof. They were over-run by liberals.

Some more attention to the y-axis please.

The neoliberal view L As long as everyone, from all genders, races and cultures, is visiting the same food bank this is equality.

left – traditional left – y-axis inequality
liberal – elitist left – x -axis inequality (this doesn't affect my background of wealth and privilege)

You can see why liberals love identity politics.

UserFriendly November 29, 2016 at 1:42 pm

https://www.politicalcompass.org/counterpoint-20161110

The main page has a test you can take but that is a nice little post mortem.

susan the other November 29, 2016 at 1:20 pm

labor is being co-opted by the right: the Republican Workers Party I think this rhymes with Fascist. But then, in a world soon to be literally scrambling for high ground and rebuilding housing for 50 million people the time honored "worker" might actually have a renaissance.

UserFriendly November 29, 2016 at 1:31 pm

Identity politics does make democrats lose. The message needs to be economic. It can have the caveat that various sub groups will be paid special attention to, but if identity is the only thing talked about then get used to right wing governments.

TK421 November 29, 2016 at 3:54 pm

If identity politics is a winning issue, where are the wins?

readerOfTeaLeaves November 29, 2016 at 12:04 pm

Empowerment is not just about language, it's about capital, who's got it, who hasn't and what role government plays between them.

Empowerment is very much about capital, but the Left has never had the cajones to stare down and take apart the Right's view of 'capital' as some kind of magical elixir that mysteriously produces 'wealth'.

I ponder my own experiences, which many here probably share:

First: slogging through college(s), showing up to do a defined list of tasks (a 'job', if you will) to be remunerated with some kind of payment/salary. That was actual 'work' in order to get my hands on very small amounts of 'capital' (i.e., 'money').

Second: a few times, I just read up on science or looked at the stock pages and did a little research, and then wrote checks that purchased stock shares in companies that seemed to be exploring some intriguing technologies. In my case, I got lucky a few times, and presto! That simple act of writing a few checks made me look like a smarty. Also, paid a few bills. But the simple act of writing checks cost me n-o-t-h-i-n-g in terms of time, energy, education, physical or mental exertion.

Third: I have also had the experience of working (start ups) in situations where - literally!!! - I made less in a day in salary than I'd have made if I'd simply taken a couple thousand dollars and bought stock in the place I was working.

To summarize:
- I've had capital that I worked long and hard to obtain.
- I've had capital that took me a little research, about one minute to write a check, and brought me a handsome amount of 'capital'. (Magic!)
- I've worked in situations in which I created MORE capital for others than I created for myself. And the value of that capital expanded exponentially.

If the Left had a spine and some guts, it would offer a better analysis about what 'capital' is, the myriad forms it can take, and why any of this matters.

Currently, the Left cannot explain to a whole lot of people why their hard work ended up in other people's bank accounts. If they had to actually explain that process by which people's hard work turned into fortunes for others, they'd have a few epiphanies about how wealth is actually created, and whether some forms of wealth creation are more sustainable than other forms.

IMVHO, I never saw Hillary Clinton as able to address this elemental question of the nature of wealth creation. The Left has not traditionally given a shrewd analysis of this core problem, so the Right has been able to control this issue. Which is tragic, because the Right is trapped in the hedge fund mentality, in the tight grip of realtors and mortgage brokers; they obsess on assets, and asset classes, and resource extraction. When your mind is trapped by that kind of thinking, you obsess on the tax code, and on how to use it to generate wealth for yourself. Enter Trump.

Matthew G. Saroff November 29, 2016 at 12:07 pm

One small correction: Smith is not an Ivy League school, it is one of the "Seven Sisters:
Ivy League:
Brown
Columbia
Cornell
Dartmouth
Harvard
Penn
Princeton
Yale

Seven Sisters:
Barnard
Bryn Mawr
Mount Holyoke
Radcliffe
Smith
Vassar
Wellesley

Theo November 29, 2016 at 12:35 pm

A much more nuanced discussion of the primacy of identity politics on the Left in Britain and the US is http://www.counterpunch.org/2016/11/29/prospects-for-an-alt-left/ "Prospects for an Alt-Left," November 29, 2016, by Elliot Murphy, who teaches in the Division of Psychology and Language Sciences at University College, London.

And let's not forget that identity politics arose in the first place because of genuine discrimination, which still exists today. In forsaking identity politics in favor of one of class, we should not forget the original reasons for the rise of the phenomena, however poorly employed by some of its practitioners, and however mined by capitalism to give the semblance of tolerance and equality while obscuring the reality of intolerance and inequality.

Lambert Strether November 29, 2016 at 3:28 pm

Trivially, I would think the last thing to do is adopt the "alt-" moniker, thereby cementing the impression in the mind of the public that the two are in some sense similar.

Adamski November 29, 2016 at 6:22 pm

The blogger Lord Keynes at Social Democracy for the 21st Century at blogspot suggests Realist Left instead of alt-left. I think how people are using the term "identity politics" at the moment isn't "actual anti-racism in policy and recruitment" but "pandering to various demographics to get their loyalty and votes so that the party machine doesn't have to try and gain votes by doing economic stuff that frightens donors, lobbyists and the media". Clinton improved the female vote for Democratic president by 1 percentage point, and the black and Latino shares of the Republican were unchanged from Romney in 2012. Thus, identity politics is not working when the economy needs attention, even against the most offensive opponent.

Trigger warning November 29, 2016 at 12:41 pm

So to repress class conflicts, the kleptocracy splintered them into opposition between racists and POC, bigots and LGBTQ, patriarchal oppressors and women, etc., etc. The US state-authorized parties used it for divide and rule. The left fell for it and neutered itself. Good. Fuck the left.

Outside the Western bloc the left got supplanted with a more sensible opposition: between humans and the overreaching state. That alternative view subsumes US-style identity politics in antidiscrimination and cultural rights. It subsumes traditional class struggle in labor, migrant, and economic rights. It reforms and improves discredited US constitutional rights, and integrates it all into the concepts of peace and development. It's up and running with binding law and authoritative institutions .

So good riddance to the old left and the new left. Human rights have already replaced them in the 80-plus per cent of the world represented by UNCTAD and the G-77. That's why the USA fights tooth and nail to keep them out of your reach.

Anon November 29, 2016 at 1:05 pm

To All Commenters: thanks for the discussion. Many good, thoughtful ideas/perspectives.

Mine? Living in California (a minority white populace, broad economic engine, high living expenses (and huge homeless population) and a leader in alternative energy: Trump is what happens when you don't allow the "people" to vote for their preferred candidates (Bernie) and don't listen to a select few voters in key electoral states (WI,MI,PA).

The electorate is angry (true liberals at the Dems, voters in select electoral states at "everything"). If democracy is messy, then that's what we've got; a mess. Unfortunately, it's coming at the absolutely wrong time (Climate Change, lethal policing, financial elite impunity).

Hold this same election with different (multiple) candidates and the outcome is likely different. In the end, we all need to work and demand a more fair and Just society. (Or California is likely to secede.)

Jerry Denim November 29, 2016 at 1:20 pm

"Meanwhile the global Left looked on from its Ivory Tower of identity politics and was pleased. Capitalism was spreading the wealth to oppressed brothers and sisters, and if there were some losers in the West then that was only natural as others rose in prominence."

I can only imagine the glee of the wealthy feminists at Smith while they witnessed the white, lunch pailed, working class American male thrown out of work and into the gutter of irrelevance and despair. The perfect comeuppance for a demographic believed to be the arch-nemesis of women and minorities. Nothing seems quite so fashionable at the moment as hating white male Republicans that live outside of proper-thinking coastal enclaves of prosperity. Unfortunately I fail to see how this attitude helps the country. Seems like more divide and conquer from our overlords on high.

TK421 November 29, 2016 at 3:56 pm

You might find this interesting: link

Anon November 29, 2016 at 9:06 pm

just more whining from the Weekly Standard. While men may have been disproportionately displaced in jobs that require physical strength, many women (nurses?) likely lost their homes during the Great Financial Scam and its fallout.

The enemy is a rigged political, financial, and judicial system.

susan the other November 29, 2016 at 1:37 pm

Identity Politics gestated for a while before the 90s. Beginning with a backlash against Affirmative Action in the 70s, the Left began to turn Liberal. East Coast intellectuals who were anxious they would be precluded from entering the best schools may have been the catalyst (article from Jacobin I think).

But certainly the fall of the USSR was the thing that forced capitalism's hand. At that point capitalism had no choice but to step up and prove that it could really bring a better life to the world.

A Minsky event of biblical proportions soon followed (it only took about 10 years!) and now all is devastation and nobody has clue. But the 1990 effort could have been in earnest. Capitalists mean well but they are always in denial about the inequality they create which finally started a chain reaction in "identity politics" as reactions to the stress of economic competition bounced around in every society like a pinball machine. A tedious and insufferable game which seems to have culminated in Hillary the Relentless. I won't say capitalism is idiotic. But something is.

David November 29, 2016 at 2:47 pm

"Perhaps the NC commentariat could define up and down versions of each of these political philosophies (ie. left and right) and start to take control of the framing."

Well, I'll have a first go, since I was around at the time.

Left and Right only really make sense in the context of the distribution of power and wealth, and only when there is a difference between them about that distribution. This was historically the case for more than 150 years after the French Revolution. By the mid-1960s, there was a sense that the Left was winning, and would continue to win. Progressive taxation, zero unemployment, little real poverty by today's standards, free education and healthcare . and many influential political figures (Tony Crosland for example) saw the major task of the future as deciding where the fruits of economic growth could be most justly applied.

Three things happened that made the Left completely unprepared for the counter-attack in the 1970s. First, simple complacency. When Thatcher appeared, most people thought she'd escaped from a Monty Python sketch. The idea that she might actually take power and use it was incredible.

Secondly, the endless factionalism and struggles for power within the Left, usually over arcane points of ideology, mixed with vicious personal rivalries. The Left loves defeats, and picks over them obsessively, looking for someone else to blame.

Third, the influence of 1968 and the turning away from the real world, towards LSD and the New Age, and the search for dark and hidden truths and structures of power in the world. Fueled by careless and superficial readings of bad translations of Foucault and Derrida, leftists discovered an entire new intellectual continent into which they could extend their wars and feuds, which was much more congenial, since it involved eviscerating each other, rather than seriously taking on the forces of capitalism and the state.

And that's the very short version. We've been living with the consequences ever since. The Left has been essentially powerless, and powerlessness, of course, corrupts. There's always someone weaker than you, which is why identity politics is essentially a conservative, disciplining force, with a vested interest in the problems it has chosen to identify continuing, or it would have no reason to exist.

So until class-based politics and struggles over power and money re-start (if they ever do) I respectfully suggest that "Left" and "Right" be retired as terms that no longer have any meaning.

FluffytheObeseCat November 29, 2016 at 6:20 pm

" powerlessness, of course, corrupts. There's always someone weaker than you, which is why identity politics is essentially a conservative, disciplining force, with a vested interest in the problems it has chosen to identify "

Yes. As long as the doyens of identity politics don't have any real fear of being homeless they can happily indulge in internecine warfare. It's a lot more fun than working to get $20/hour for a bunch of snaggle-toothed guys who kind of don't like you.

integer November 29, 2016 at 6:48 pm

Very interesting. Thank you.

George Phillies November 29, 2016 at 3:06 pm

I read: "Traditional dialectical history was being supplanted by a new suite of studies based around truth as "discourse". Driven by the French post-modern thinkers of the 70s and 80s, the US academy was adopting and adapting the ideas Foucault, Derrida and Barthe to a variety of civil rights movements that spawned gender and racial studies."

Of course, I have been a college professor since the late 1970s. On the other hand, I am a physicist. The notion that truth is discourse is, in my opinion, daft, and says much about the nature of the modern liberal arts, at least as understood by many undergraduates. I have actually heard of the folks referenced in the above, and to my knowledge their influence in science, engineering, technology, and mathematics–the academic fields that are in this century actually central*–is negligible.

*Yes, I am in favor of a small number of students becoming professional historians, dramatists, and composers, but the number of these is limited.

Identity politics is a disaster ongoing for the Democratic Party, for reasons they seem to have overlooked. First, the additional identity group is white. We already see this in the South, where 90% of the white population in many states votes Republican.

When that spreads to the rest of the country, there will be a permanent Republican majority until the Republicans create a new major disaster.

Second, some Democratic commentators appear to have assumed that if your forebearers spoke Spanish, you can not be white. This belief is properly grouped with the belief that if your forebearers spoke Gaelic or Italian, you were from one of the colored races of Europe (a phrase that has faded into antiquity, but some of my friends specialize in American history of the relevant period), and were therefore not White.

Identity politics is a losing strategy, as will it appears be noticed by the losers only after it is too late.

Oregoncharles November 29, 2016 at 3:41 pm

An extremely important point, but overblown in a way that may reflect the author's background and is certainly rhetorical.

So soon we forget the Battle of Seattle. The Left has been opposed to globalization, deregulation, etc., all along. Partly he's talking about an academic pseudo-left, partly confusing the left with the Democrats and other "center-left," captured parties.

That doesn't invalidate his point. If you want to see it in full-blown, unadorned action, try Democrat sites like Salon and Raw Story. A factor he doesn't do justice to is the extreme self-righteousness that accompanies it, supported, I suppose, by the very real injustices perpetrated against minorities – and women, not a minority.

The whole thing is essentially a category error, so it would be nice to see a followup that doesn't perpetuate the error. But it's valuable for stating the problem, which can be hard to present, especially in the face of gales of self-righteousness.

TG November 29, 2016 at 6:58 pm

Well said. An excellent attack on 'identity politics.'

I mean, Barack Obama was our first black president, but most blacks didn't do very well. George W. Bush was our first retard president, and most people with cognitive handicaps didn't do very well.

But we can boil it all down to something even simpler and more primal: divide and conquer.

[Nov 28, 2016] Bill Black Howard Dean Wants to Continue Austeritys Assault on the Working Class

Nov 28, 2016 | www.nakedcapitalism.com by By Bill Black

I researched Dean's statements about austerity to try to understand why a man who opposed the DLC would be so enthusiastic about inflicting austerity on the working class. I found part of the answer. Dean was Vermont's governor. Dean explained to a conservative " Squawk Box " host why he supported austerity based on his experience as a governor.

There's a balance sheet that has to be met here and every Governor knows that, both Republicans and Democrats. And you got to do that when you're the President.

The first sentence is correct. The second sentence is false. States do not have sovereign currencies. The United States has a sovereign currency. A nation with a sovereign currency is nothing like a state when it comes to fiscal policy – or a household. I cannot explain why Dean does not understand the difference and has apparently never read an economic explanation of the difference. But we can fill that gap. Again, I urge his supporters who have the ability to bring serious policy matters to his attention to intervene. Dean is flat out wrong because he does not understand sovereign currencies. The consequences of his error are terrible. They would lock the Democratic Party into the continuing the long war on the working class through austerity. That is a prescription for disaster for the Nation and the Democratic Party.

Progressive Democrats enlisted in the New Democrats' austerity wars because they seemed to be politically attractive. The political narrative was as simple as it was false. The austerity creation myth was told first by Bob Woodward in the course of writing his sycophantic ode to Greenspan as the all-knowing "Maestro" of the economy. Bill Clinton, as President-Elect, was given an economics lecture by Alan Greenspan. The economics lecture – from an Ayn Rand groupie – was (shock) that austerity was good and New Deal stimulus was evil. Bill's genius was taking the "Maestro's" words as revealed truth and turning his back on the New Deal. Bill embraced austerity. The economy grew. Bill ran a budget surplus – the holy grail of austerity. Bill was followed by Bush under whose administration economic growth slowed and the federal deficits reemerged. There was a Great Recession.

The creation myth was clear. The newly virtuous New Democrats (after instruction in economics by Saint Greenspan) embraced austerity and all was good. The vile Republicans, hypocrites all, had renounced the true faith of austerity and they produced mountains of evil debt that caused poor economic growth.

Dean pushed this narrative in his Squawk Talk appearance. When asked to explain the specific Bush policies that he claimed were to blame for poor growth continuing under President Obama, Dean went immediately and exclusively to Bush's increases in the federal "debt" to answer the question. "The biggest ones are the deficits that were run up . The deficits were enormous."

The New Democrats' narrative, which Dean parroted, is false. One of the definitive refutations of the Greenspan (and Robert Rubin) as Genius myth was by the economists Michael Meeropol and Carlos F. Liard-Muriente in 2007. Their refutation was inherently incomplete because it was "too early" – the collapse of the housing bubble in 2007, the 2008 financial crisis and the Great Recession were vital facts that helped reduce the myth to the level of farce. These facts were unavailable to academic authors publishing in 2007. The authors discuss the enormous role that the stock bubble played in the Clinton expansion, but they do not discuss the housing bubble's contribution.

Any tale that begins with Alan Greenspan providing Bill Clinton with the secret to economic success is justly laughable today. Clinton was our luckiest president when it came to economics. His expansion was largely produced by the high tech stock bubble. When it collapsed, the housing bubble, explicitly encouraged by Greenspan as a means of avoiding a severe recession, took up much of the slack. Bush eventually inherited from Clinton a moderate recession that led inevitably to moderately increased (not "enormous") federal deficits. The housing bubble then hyper-inflated, bringing the economy rapidly out of the moderate recession. The hyper-inflation, of the housing bubble, however, was driven by the three most destructive epidemics of financial fraud in history and it caused a global financial crisis and the Great Recession. A great recession leads inevitably to a very large increase in the federal budget deficit.

Greenspan, Bob Rubin, and Bill Clinton were lucky in their timing – for a time. The historical record in the U.S. demonstrates that periods of material federal budget surpluses are followed with only modest lags by depressions and, now, the Great Recession. Fortunately, such periods of running material budget surpluses have been unusual in our history. As my colleagues have explained in detail, the U.S., which is extremely likely to run balance of trade deficits, should typically run budget deficits.

We all understand how attractive the myth of the virtuous and frugal Dems producing great economic results under Clinton while the profligate Republicans produced federal deficits and poor economic growth was to Democratic politicians. But the Dems should not spread myths no matter how politically attractive they are. The catastrophic consequences of President Obama and Hillary Clinton coming to believe such myths were shown when, as I have just described in several columns, they promised to lead the long war against the working class that is austerity.

If people like Dean focused on the origins of the Clinton creation myth they would run from its lies. The original actual creation myth is found in the book of Woodward. The brilliant Greenspan converted the young Bill Clinton by exposing him to the one true faith (theoclassical economics) and successfully calling on Clinton to renounce the devil (FDR) and all his work (the New Deal) and to sit at the (far) right hand of Ayn Rand. The result was economic nirvana. Politically, that's a terrible creation myth for Democrats to tell around the campfire – or to voters. Economically, it's a lie, indeed, a farce.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published at New Economic Perspectives Soulipsis November 28, 2016 at 6:30 am

This is one of the arguments, the making of which I've never understood. How could Dean not know what he's doing by supporting austerity? How could the 0.001% not know? Of course they know! Sometimes I think hyperacademics like who can be found trolling around this website are so involved in the prestige of their discipline that they lose track of the world of wordless import that makes up most of reality. This is why illiterate people are sometimes very wise, they have no choice but to remain immersed in the wisdom of the Creation. I think Black and others are wasting their breath on explanations and urgings such as this. And I think the brutality of Daesh and the Saudis is the brutality of the 0.001%, and it's a delusion to think they don't have the social model that is on display in Syria planned for the domestic U.S. market. What else is the 2012 NDAA for? NSPD 51, and the National Incident Management System. It's coming, and Dean is just a little player. He probably got photographed doing something he shouldn't've and now he's stuck. Whatever, how could he not know? He knows. Bill Clinton doesn't or didn't know? Please.

David England November 28, 2016 at 6:52 am

I am no economist, but it seems to me that this power of sovereign currency (to borrow increasing amounts indefinitely) only works so long as people believe that they will be repaid. If one continues to to rack up an exponentially growing debt, eventually that belief will be challenged. There are numerous areas of expenses which could be trimmed, but they generally involve a relinquishing of our empire.

Skip Intro November 28, 2016 at 3:25 pm

One key to maintaining the appearance of sustainability for increasing debts is making sure much of the deficit spending is going into productive infrastructure investments. In this case the increasing debt will be accompanied by actual growth.

susan the other November 28, 2016 at 3:33 pm

It puzzles me that private parties are allowed to buy sovereign debt. It changes the debt from sovereign to private. Making it no longer an instrument of use but of exchange. Selling sovereign debt destroys sovereignty. Much better to force the privateers to come up with their own investments for which they bond and trade with each other and leave sovereign money out of it. The banksters and their ilk like George Soros, King of the Vigilantes, should be detained until they pay back everything they embezzled. and etc. It's just too easy for banksters to buy sovereign debt (with a commodity they are legally allowed to create at the sovereign's expense) and then demand interest on it. So clearly Howie Dean is a ditz.

Steve C November 28, 2016 at 7:12 am

Dean as governor wasn't known as particularly progressive. He emerged as such when he went national.

divadab November 28, 2016 at 7:23 am

Yup – he was never the leftie he was presented as. He and Bernie are opposed on many issues.

Also he's worse on foreign policy than Bernie (who's mediocre art best) and even Trump – he's in the Neocon camp.

Vatch November 28, 2016 at 10:06 am

I've read similar things in comments at NC and elsewhere about California Governor Jerry Brown, whose left wing moonbeam reputation doesn't match his big business friendly actions.

polecat November 28, 2016 at 12:11 pm

Jerry Brown is or was, if I recall, a practicing Jesuit ..

Penance people !

Buttinsky November 28, 2016 at 12:56 pm

Jerry Brown - Zen Jesuit:

http://www.nytimes.com/1987/01/29/world/kamakura-journal-zen-jerry-brown-and-the-art-of-self-maintenace.html

Michael November 28, 2016 at 12:12 pm

Dean has his failings, but being the first Governor to sign a Civil Unions bill, implementing a 99%+ child health care access law, and creating a systematic way for elementary school teachers to get resources to families with kids that are in trouble is a pretty sound Progressive legacy.

Ruben November 28, 2016 at 7:13 am

It is not clear to me that Austerity is a long war against the working class. It might be that Austerity turns out class neutral, or even pro-working class, depending on how gov't expenditures shortages are applied across sectors? If Austerity is a war against the working class then the opposite of Austerity, Stimulus, necessarily is pro-working class but we have seen that Stimulus might be used to bail out non-working class sectors leaving working class wages and employment opportunities depressed.

Dirk77 November 28, 2016 at 8:26 am

I suspect it is the way it is applied. The shocking hypocrisy of the current pro-austerity people is what jars Black I guess. I mean these same austerity people were for tax cuts for the rich, giving trillions to Wall Street, forgiving their (real) crimes, and spending trillions more on wars whose result was to cause misery for millions of people and make the world an even less safe place. And then they talk about keeping a tight budget? Hell needs to add a ninth circle for these people.

Dirk77 November 28, 2016 at 8:46 am

*tenth

Dave November 28, 2016 at 11:43 am

Man, I love this site. I get more out of the comments than the articles sometimes. Your paragraph does more to encapsulate reality than do ten long pages of learned professors.

Vatch, re "Moonbeam Brown", just google

"Something's not right about this California water deal, L.A. Times"

Steve H. November 28, 2016 at 9:02 am

It's MMT for me,
And austerity for thee.

[From Mexico]

PlutoniumKun November 28, 2016 at 10:22 am

Austerity is primarily against the working class because it is deflationary. It benefits creditors over debtors. And creditors are invariably the wealthy (i.e. the owners of capital). A moderately inflationary fiscal/monetary policy with a focus on full employment puts power in the hand of workers. An austerity policy (by which I mean one which puts an emphasis on balancing the books over employment) gives power to the owners of capital.

Ignacio November 28, 2016 at 11:09 am

Well, tell us a case in which austerity was inflicted against the richest when the government cuts on private airports, ah no they are private.

Disturbed Voter November 28, 2016 at 7:15 am

Response to Ayn Rand A doesn't equal A if you are in government. Politicians can talk out of both sides of their mouth at the same time.

Response to Howard Dean Dean who? ;-)

knowbuddhau November 28, 2016 at 7:32 am

> But the Dems should not spread myths no matter how politically attractive they are.

All myths are not created equal. I rue the day when "myth" became pejorative.

I dare say Prof. Black lives by one. If Jung was right, and I think he was, we all do, albeit ignorantly, as in, we ignore their functioning (even my beloved science is mythological, but that doesn't make it untrue). And his recasting of the myth of austerity in biblical terms is as potent as it is funny. Our denigration of myths is complete enough that Prof. Black can say the above, and yet do some very effective countermyth-making nonetheless.

Do the high priests of economics and politics really believe their public myth-making? Or is their a private understanding that better fits the phenomena?

I know I must sound like a broken record, but due to its regrettable unfamiliarity, this bears repeating.

1. The first function of mythology [is] to evoke in the individual a sense of grateful, affirmative awe before the monstrous mystery that is existence

2. The second function of mythology is to present an image of the cosmos, an image of the universe round about, that will maintain and elicit this experience of awe. [or] to present an image of the cosmos that will maintain your sense of mystical awe and explain everything that you come into contact with in the universe around you.

3. The third function of a mythological order is to validate and maintain a certain sociological system: a shared set of rights and wrongs, proprieties or improprieties, on which your particular social unit depends for its existence.

4. The fourth function of myth is psychological. That myth must carry the individual through the stages of his life, from birth through maturity through senility to death. The mythology must do so in accords with the social order of his group, the cosmos as understood by his group, and the monstrous mystery.

(From http://www.trinity.edu/cspinks/myth/campbell_4_functions_myth.pdf .)

As we all know so well. the myth of neoliberalism is as succinct as it is brutal. "Because markets" and "Go die," though, don't fulfill all four functions. If I had the economic and financial chops, I'd examine Saint Alan and the Church of Neoliberalism's mythology methodically and systematically with the intent to creatively destroy it. But that wouldn't be enough. It'd be helpful to offer an alternative, but I don't have that, either. Fat lot of good I am.

That's why I like Prof. Black's retelling so much. It puts the absurdity of the pseudo-mythology of neoliberalism in terms familiar enough that that absurdity stands right out.

And I also dare say what we desperately need now is a fully functioning and genuine mythology that leads us out of neoliberal hell and into a more perfect union of nature and society. First party to do so wins the future.

Andrea Greenberg November 28, 2016 at 9:54 am

Surprised that Black refers to Dean as a "progressive voice". That has never really been the case and it's especially not true now. Also surprised that Black supports Ellison whose foreign policy includes support for a no- fly zone in Libya- mirroring the position held by Clinton.

jo6pac November 28, 2016 at 3:51 pm

My thought also on both counts.

tegnost November 28, 2016 at 9:58 am

I sense a connection between this and the peak oil demand article. In the '80's and beyond, financial services have sought and gained a control economy effect with student loans and more recently the ACA, and feel that fracking, QE and the housing bubble all fit in there somewhere as well. Basically it boils down to being easier to make money at the top when they choose where the income stream comes from, i.e., in the New Deal citizens got money in some form of cash payment, from SS to welfare, and could choose to spend the money on what they wanted to spend it on, which in turn caused uncertainty in the finance arena, not so much that they couldn't survive, but the financiers could envision a better world for themselves, enter student loans and now any kid without wealthy parents has a lifetime of unpayable debt, a drag on their professional income, or no advanced education with it's implicit restriction on income, or a combo of all three. This same dynamic led us to the ACA which is, as opposed to a medicare style plan that could potentially curtail costs, become little more than a payment stream, a class marker, and has nothing to do with healthcare except in the sense that high costs make indebted heath industry workers able to pay their own student loan, and a class warfare tool such that those wealthy healthcare industroids can separate their offspring from the herd by being able to pay for their offspring's education, as it does with the finance industry that manages the payment stream. I don't currently see this dynamic changing, alas but maybe the newfound vigor of the purple dems could be mobilized in this direction if they can ignore the payoffs for doing nothing.
As to the hyper inflation comment, I think any renter who has struggled with the disruptions caused by increased rents would say yes, that's hyperinflation, and indeed feels a lot like needing a wheelbarrow of cash to pay.

sharonsj November 28, 2016 at 11:17 am

Let's talk about reality. For most folks, more austerity is going to kill us. We are so squeezed now that we can barely pay our bills and save our homes. We have rampant price inflation, which both the government and the media pretend does not exist. And the latest figures for Xmas shopping show that although more people are buying stuff, they are spending less money. If the idiots running the country think tax breaks for the rich will boost the economy, then they have learned nothing from the last 30 years.

Arizona Slim November 28, 2016 at 12:29 pm

ISTR hearing that, if you want to grow your business, you need to get more people to buy more of your goods or services more often. Having more people buying less? Doesn't sound like a recipe for success.

Horatio Parker November 28, 2016 at 11:30 am

I'm glad someone is saying that a correct understanding of the economy is where the Democrats need to be. Imagine the impact if a candidate ran on payroll tax relief, expanded SS and a job guranteee.

I like Keith Ellison as well, but I can't find anything about his economic policies. If Dean's economics are disqualifying, and Ellison suggested as an alternative, shouldn't we know if he's an improvement?

Dave November 28, 2016 at 11:39 am

The Democrats are going to have to completely reinvent themselves if they ever want to get a vote or a dollar from me again.

I went to a Democratic Party whine and cheese party the other day where the local "leadership" tried to harness some kind of crowd energy against Trump based on the mere fact that they had a D in front of their names.

The delicious moment came in the Q&A. I waited until after the usual regurgitations of racismphobiahatethreatsdisaster about Trump to ask my question:

"You had a winner in Bernie and your party chose that corrupt disaster Hillary–now we're supposed to trust you to lead us?" I thought the moderator was going to have a stroke. Her face turned an appropriate shade of blue-purple.

An agreeing buzz of people around me. It was positively sadistic watching the scrambling of the Democratic excusemakers shuffling their papers.

larry November 28, 2016 at 11:45 am

It is worse than you say for the Dems. Trump has once indicated that he understands the nature of a sovereign currency. If he wasn't bullshitting, then the Dems are in for an economic shock, at the very least.

flora November 28, 2016 at 12:16 pm

Thanks for this post. Great final paragraph. The DLC neolib Dems' greatest achievement has been in presenting this terrible destruction as virtuous. 'We have to destroy the 90%'s economy in order to save it.'

Sound of the Suburbs November 28, 2016 at 1:34 pm

We have been through a re-run of history.

1920s/2000s – high inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase

1929/2008 – Wall Street crash

1930s/2010s – Global recession, currency wars, rising nationalism and extremism

Milton Freidman used the old 1920s economics, neoclassical economics, as his base but didn't fix any of its problems.

Wall Street did exactly the same thing.

Jim Rickards ("Currency Wars" and "The Death of Money") has explained how the removal of Glass-Steagall allowed Wall Street to repeat 1929.

In 1929, they carried out margin lending into the US stock market to artificially inflate its value. They packaged up these loans in the investment side of the business to sell them on.

In 2008, they carried out mortgage lending into the US housing market to artificially inflate its value. They packaged up these loans in the investment side of the business to sell them on.

The FED responded with monetary policy that didn't work again, the "New Deal" pulled the US out in the end.

Richard Koo explains:
https://www.youtube.com/watch?v=8YTyJzmiHGk
(In the first 12 mins)

In 1929, the FED wasn't quite so quick with monetary policy and stocks were a much more liquid asset and so the crash was so fast no one had a chance to deal with it as it was occurring.

Monetary policy did stop the initial crash in asset prices but didn't reflate the economy; you need a "New Deal" for that.

The only real difference.

Why are multi-nationals hoarding cash and not investing?

Oh look it's Keynes's liquidity trap, its exactly the same.

Keynes studied the Great Depression and noted monetary stimulus lead to a "liquidity trap".

Businesses and investors will not invest without the demand there to ensure their investment will be worthwhile.

The money gets horded by investors and on company balance sheets as they won't invest.

Cutting wages to increase profit just makes the demand side of the equation worse and leads you into debt deflation.

Fiscal stimulus is needed (the "New Deal")

Sound of the Suburbs November 28, 2016 at 1:39 pm

Austerity is neoclassical mumbo-jumbo put forward by economists who don't understand money, debt and the money supply.

It's all in the Richard Koo video above.

Richard Koo has provided us with a graph of how it was IMF imposed austerity that killed the Greek economy at about 54 mins.

You can look at the IMF projection as well for a laugh.

What the IMF know about economics you could fit on the back of a postage stamp, its full of neoclassical economists.

RBHoughton November 28, 2016 at 9:10 pm

Yanis Varoufakis gives a very brief outline of austerity and why it cannot work here (8 minutes)

https://yanisvaroufakis.eu/2016/11/23/austerity-in-8-minutes-why-it-does-not-work-why-it-is-still-practised/

susan the other November 28, 2016 at 4:12 pm

Then there is the dutiful austerian Angela Merkel who stated that all members of the EU had "shared sovereignty" – and so that was why they had to tighten their belts to the last notch so the bond buyers could be paid back?

flora November 28, 2016 at 6:07 pm

Meanwhile .

"Democrats don't see a need to change policy – just the way they sell it"
http://www.mcclatchydc.com/news/politics-government/congress/article117525968.html#storylink=mainstage

as Thomas Frank says:
"What our modernized liberal leaders offer is not confrontation [with corporate corruption] but a kind of therapy for those flattened by the free-market hurricane: they counsel us to accept the inevitability of the situation."

Yep. Better PR will fix everything . /s

David November 28, 2016 at 8:00 pm

I'm sure this is explained elsewhere but I still am perplexed; states have to pay their debts but sovereign money-printing governments print money. So why not shift state expenses (schools, police, garbage pickup, pensions ) to the sovereign government which can print the money to cover the expense?

Yves Smith Post author November 28, 2016 at 8:21 pm

That is what that great socialist Richard Nixon did with revenue sharing. The Federal government gave states block funding, with anti-fraud oversight. Nixon figured that lower levels of governments had a better sense of their needs than the Feds did.

Ronald Reagan ended revenue sharing.

ChrisAtRU November 28, 2016 at 8:42 pm

Wow #TIL

Thanks!

Onlyindreams November 28, 2016 at 8:24 pm

If the "best of the best" Stephanie Kelton couldn't even get Sanders to break the cycle of mainstream economic "myths", who you gonna call ? If a simpleton like me can understand and believe basic MMT principles, I can not imagine the "brainiacs" running the country ( or vying to run the country) are innocent of the crime (assault with a deadly myth).

Who knows, with some luck, and he seems to be having a ton lately, the presumptive POTUS could be that accidental MMT'er. But I'm sure he would deny that luck had anything to do with it.

[Nov 28, 2016] I think oil prices are a long way away from being high enough to save the shale oil industry.

Notable quotes:
"... I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed. ..."
"... Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. ..."
"... I think oil prices are a long way away from being high enough to save the shale oil industry. ..."
"... We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline. ..."
Nov 28, 2016 | peakoilbarrel.com
Mike says:

11/27/2016 at 12:12 pm
I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed.

Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. I would say this particular shale play might work, except that from the data I see the UR's on those wells are going to be pitiful at best, far less than the Bakken. Unless it is by the shear number of wells those operators are not going to have a lot of reserves that will appreciate with rising prices. It will therefore fail too, just like the others, perhaps for different reasons, I don't know. I think oil prices are a long way away from being high enough to save the shale oil industry.

We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline.

John S says: 11/27/2016 at 1:46 pm
http://fuelfix.com/blog/2016/11/22/pioneer-denied-request-to-reclassify-oil-wells/

Happy Thanksgiving Mike! This article is for you! The RRC just refused to allow Pioneer to reclassify oil wells in the Eagle Ford to .. wait for it .GAS WELLS.

I believe Pioneer just admitted the you, Shallow, Alex, and the others have been right all along about the GOR going up, up and up.

It seems that Pioneer is trying to take advantage of the "high cost gas tax credit" designed to encourage gas production in HIGH COST low permeable tight gas reservoirs.

Interestingly, this move by Pioneer has initiated a discussion about whether there should be a new category for classifying wells. Hmmm sounds like the industry is about to hit the new Texas Legislative session up for some new tax relief to encourage horizontal drilling in its new favorite geological province the Permian Basin. But it will apply to the Barnett, Haynesville, Eagle Ford, and all those other disasters.

Mike says: 11/27/2016 at 7:22 pm
Happy Thanksgiving to you too, John ! I had actually seen this before. Scoundrels they are, one and all; Pioneer too, a Texas Company start to finish. The TRRC will roll over in another year or so, watch.
Dennis Coyne says: 11/27/2016 at 8:01 pm
Hi Mike,

Despite the CEOs not worrying about profits, I would think at some point the people buying the bonds or stock of these companies would realize that the Emperor is naked.

Eventually when enough investors get burned, the money will stop flowing. Maybe not in 2016, and perhaps not in 2017, but if oil prices remain low for the long term as experts in the field seem to suggest is a likely event (though nobody really knows future oil prices), the money will dry up. In that case these companies are done.

Dennis Coyne says: 11/27/2016 at 8:04 pm
Hi Alex,

Eventually the piper must be paid, low oil prices (for another 2 years) will be the LTO focused companies undoing in my opinion.

[Nov 28, 2016] IEA expects oil investment to fall for third year in 2017

Notable quotes:
"... "Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo. ..."
"... Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want. ..."
"... BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014. ..."
"... The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:50 am
IEA expects oil investment to fall for third year in 2017

Thu Nov 24, 2016
http://www.reuters.com/article/us-iea-oil-investment-idUSKBN13J08H

Investment in new oil production is likely to fall for a third year in 2017 as a global supply glut persists, stoking volatility in crude markets, the head of the International Energy Agency (IEA) said on Thursday.

"Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo.

"This is the first time in the history of oil that investments are declining three years in a row," he said, adding that this would cause "difficulties" in global oil markets in a few years.

Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want.

The Organization of the Petroleum Exporting Countries meets next week to try to finalize to output curbs.

"Our analysis shows that when prices go to $60, we'll make a big chunk of U.S. shale oil economical and within the nine months to 12 months of time, we may see a response coming from the shale oil and other high-cost areas," Birol told Reuters, speaking in an interview on the sidelines of the conference.
"And this may again put downward pressure on the prices."

Birol said that level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.

The IEA director general said it is still early to speculate what Donald Trump's presidency in the United States will have on energy policies.

"Having said that, both U.S. shale oil and U.S. shale gas have a very strong economic momentum behind them," Birol said.

"Shale gas has significant economic competitiveness today, and we think it will be so in the next years to come."

AlexS says: 11/26/2016 at 7:50 am
Оpposite view on 2017 global upstream capex from BMI Research:

Oil Firm Spending Seen Up in 2017 for First Time Since 2014

September 23, 2016
https://www.bloomberg.com/news/articles/2016-09-23/oil-firms-seen-spending-more-next-year-for-first-time-since-2014

• Capital spending seen growing 2.5% in 2017 and 7%-14% in 2018
• U.S. independents, Asian giants seen spurring spending growth

The oil industry may be ready to open its wallet after two years of slashing investments.

Companies will spend 2.5 percent more on capital expenditure next year than they did this year, the first yearly growth in such spending since 2014, BMI Research said in a Sept. 22 report. Spending will increase by another 7 percent to 14 percent in 2018. It will remain well below the $724 billion spent in 2014, before the worst oil crash in a generation caused firms to cut back on drilling and exploration to conserve cash, the researcher said.

North American independent producers, Asian state-run oil companies and Russian firms are prepared to boost investments next year, outweighing continued cuts from global oil majors such as Exxon Mobil Corp. and Total SA, BMI said, based on company guidance and its own estimates. Spending will increase to a total of $455 billion next year from $444 billion this year, BMI said.

"North America is where we're really expecting things to turn around," Christopher Haines, BMI's head of oil and gas research, said by telephone. "We've seen a push to really reduce costs, reduce spending and take out any waste and inefficiency. These companies have gotten to the point where they're all set up to react."

BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014.

shallow sand says: 11/26/2016 at 1:18 pm
From what I am reading, Permian hz wells will be drilled in greater numbers in 2017, regardless of price.

These wells are generally less prolific than those in the Bakken and EFS. However, the money has been raised and therefore it will spent.

To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?

The Permain wells have no staying power. Under 50 bopd after 24 months is the rule, not the exception. Under 200,000 cumulative in 60 months is the rule, not the exception.

We shall see.

AlexS says: 11/26/2016 at 4:00 pm
"To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?"

shallow sand

The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays.

Boomer II says: 11/26/2016 at 4:12 pm
"The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays."

I assumed he meant investment money. If investors want to be in gas and oil, are they picking the companies with best chance of long-term success (if there is such a thing anymore)?

AlexS says: 11/26/2016 at 4:53 pm
"I assumed he meant investment money. "

Yes, but international oil majors and U.S. shale companies generally have different investor base.

Oil majors are viewed as defensive stocks, slowly growing, but with strong balance sheets, paying high dividends and buying back shares.

On the contrary, shale companies are viewed as high risk – high reward stocks, with aggressive growth strategies, highly leveraged.

shallow sand says: 11/26/2016 at 6:46 pm
I meant both.

ExxonMobil, Chevron, ConnocoPhillips, Hess, Marathon and Oxy all have significant LTO production and all are, or were considered international upstream producers.

I agree the supermajors are defensive stocks. But there were many "growth" stock US companies which explored and produced offshore/internationally or both, prior to the LTO boom.

I may be wrong, we shall see.

AlexS says: 11/26/2016 at 7:39 pm
Most of large US E&Ps and mid-sized integrateds have divested their overseas assets during the years of shale boom.

I'm not sure that Exxon and Chevron are planning to increase their shale exposure in the near term. For Exxon, US upstream operations were hugely loss-making in 2015-16. And it has recently made two relatively large discoveries outside US.

shallow sand says: 11/26/2016 at 11:10 pm
AlexS. Are those XOM international discoveries primarily oil or gas?

Also, for the international assets you refer to which US companies divested, do you know whether the buyers are aggressively developing them? Just a guess, but I suspect maybe not.

11/30 is a big day, hoping for a cut, hard to say if it occurs whether it will be adhered to, other than by maybe the Gulf States.

AlexS says: 11/27/2016 at 6:33 am
shallow sand,

Both are oil discoveries:

1) Liza discovery offshore Guyana, with potential recoverable resource of 800 million to 1.4 billion oil-equivalent barrels

http://news.exxonmobil.com/press-release/exxonmobil-says-second-well-offshore-guyana-confirms-significant-oil-discovery

2) Owowo field offshore Nigeria with a potential recoverable resource of between 500 million and 1 billion barrels.

http://news.exxonmobil.com/press-release/exxonmobil-announces-significant-oil-discovery-offshore-nigeria

shallow sand says: 11/27/2016 at 9:27 am
AlexS. Thank you for the information.

Interesting to note Nexen is a partner in both ventures, while Hess and Chevron are in one each.

I agree XOM has sustained significant losses in North America, but they continue to spend money on new wells. Had they not spent the money they have in North America (both shale and tar sands) would the money have been spent elsewhere. A tough one to know the answer to.

I recall XOM was going to partner in Russia on projects and those were halted for political reasons? Did those projects go ahead without them?

AlexS says: 11/27/2016 at 6:39 pm
shallow sand,

I'm not saying that Exxon stopped investing in U.S. upstream. My point is that oil supermajors, like Exxon, Chevron, BP, Shell and Total are not diverting investments from deep offshore, LNG and other long-term projects to U.S. shale. They cut upstream capex both in U.S. and in overseas projects.

The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad

[Nov 28, 2016] Oil companies shoulder pain of downturn with lower output

Notable quotes:
"... In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley. ..."
"... Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop. ..."
"... "Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond." ..."
"... We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that. ..."
"... Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them. ..."
"... I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative). ..."
"... Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production. ..."
"... But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:25 am
Oil companies shoulder pain of downturn with lower output

Nov 24, 2016
http://www.reuters.com/article/us-oil-production-idUSKBN13J0I0

The world's listed oil companies have slashed oil output by 2.4 percent so far this year.

The aggregated production of 109 listed companies that produce more than a third of the world's oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley showed.

In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as U.S. shale oil producers like EOG Resources and Occidental Petroleum.

The drop in oil companies' output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

"Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment," Morgan Stanley equity analyst Martijn Rats said.

Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

"These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilizes," Rats said.

"Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond."

George Kaplan says: 11/26/2016 at 6:03 am
We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that.

When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now. Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them.

And how about this paragraph

"Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production."

He/she has suddenly started to talk about company finances rather than production, but without actually telling the reading public.

Cost reductions caused the drop for heavens sake. "Increased efficiencies" and "technological advancements" – do you think the author has the faintest idea what that actually means and how it is related to anything else he says.

I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative).

AlexS says: 11/26/2016 at 8:29 am
"When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now."

It should be actually 2015 + 3 (or 5), as pre-FID projects have been posponed since end-2014 – early 2015.

Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production.

But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation

[Nov 28, 2016] History Lesson

jessescrossroadscafe.blogspot.com
Tsar Nicholas II: I know what will make them happy. They're children, and they need a Tsar! They need tradition. Not this! They're the victims of agitators. A Duma would make them bewildered and discontented. And don't tell me about London and Berlin. God save us from the mess they're in!

Count Witte: I see. So they talk, pray, march, plead, petition and what do they get? Cossacks, prison, flogging, police, spies, and now, after today, they will be shot.

Is this God's will? Are these His methods? Make war on your own people? How long do you think they're going to stand there and let you shoot them? YOU ask ME who's responsible? YOU ask?

Tsar Nicholas II: The English have a parliament. Our British cousins gave their rights away. The Hapsburgs, and the Hoehenzollerns too. The Romanovs will not. What I was given, I will give my son.

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason. But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right. The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

John Kenneth Galbraith

[Nov 28, 2016] The Incredible Lightness of Thinking In the Liberal Professional Class and the Ascended Masters of Hypocrisy

Notable quotes:
"... The continuing reaction of the liberal elite to the repudiation of the Democratic establishment by their traditional constituencies of the young and working people is a wonder to behold. They thrash back and forth between a denial of their failure, and disgust at everyone else they can blame for it. ..."
"... It is frustrating because they do not know how to extract themselves from it, admit their errors and reform the system, without undermining the very assumptions that entitle them, in their own minds at least, to rule as the highly honored insiders, the elect of professional accomplishment. ..."
Nov 28, 2016 | jessescrossroadscafe.blogspot.com
"Listening to the leading figures of the Democratic party establishment, however, you'd never know it. Cool contentment is the governing emotion in these circles. What they have in mind for 2016 is what we might call a campaign of militant complacency. They are dissociated from the mood of the nation, and they do not care...

What our modernized liberal leaders offer is not confrontation [with corporate corruption] but a kind of therapy for those flattened by the free-market hurricane: they counsel us to accept the inevitability of the situation."

Thomas Frank


"Too many of America's elites-among the super-rich, the CEOs, and many of my colleagues in academia-have abandoned a commitment to social responsibility. They chase wealth and power, the rest of society be damned."

Jeffrey Sachs


"This elite-generated social control maintains the status quo because the status quo benefits and validates those who created and sit atop it. People rise to prominence when they parrot the orthodoxy rather than critically analyze it. Intellectual regurgitation is prized over independent thought. Real change in politics or society cannot occur under the orthodoxy because if it did, it would threaten the legitimacy of the professional class and all of the systems that helped them achieve their status.

Kristine Mattis, The Cult of the Professional Class


The continuing reaction of the liberal elite to the repudiation of the Democratic establishment by their traditional constituencies of the young and working people is a wonder to behold. They thrash back and forth between a denial of their failure, and disgust at everyone else they can blame for it.

cf Paul Krugman, The Populism Perplex .

It could not possibly be because of anything they might have done or failed to do. And so they are caught in a credibility trap.

It is frustrating because they do not know how to extract themselves from it, admit their errors and reform the system, without undermining the very assumptions that entitle them, in their own minds at least, to rule as the highly honored insiders, the elect of professional accomplishment.

Caution on language.


[Nov 26, 2016] Trumpism Has Dealt a Mortal Blow to Orthodox Economics and Social Science

Notable quotes:
"... Grappling with the shock of Donald Trump's election victory, most analysts focus on his appeal to those in the United States who feel left behind, wish to retrieve a lost social order, and sought to rebuke establishment politicians who do not serve their interests. In this respect, the recent American revolt echoes the shock of the Brexit vote in the United Kingdom, but it is of far greater significance because it promises to reshape the entire global order, and the complaisant forms of thought that accompanied it. ..."
"... Ideas played an important role in creating the conditions that produced Brexit and Trump. The 'social sciences' - especially economics - legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy ..."
"... The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas. ..."
"... The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class. ..."
"... Financialization also led to the near-abandonment of the 'national' industrial economy in favor of global sourcing and sales, and a handsome financial rentier economy built on top of it. Meanwhile, automation trends led to shedding of jobs everywhere, and threaten far more. ..."
"... Third, there is the push for austerity, a recurrent trope of the 'neoliberal' era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance ..."
"... The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.] ..."
"... Mainstream accounts of politics recognized the role of identities in the form of wooden theories of group mobilization or of demands for representation. However, the psychological and charismatic elements, which can give rise to moments of 'phase transition' in politics, were altogether neglected, and the role of social media and other new methods in politics hardly registered. ..."
"... Trumpism is a crisis for the most prestigious methods of understanding economic and social life, ennobled and enthroned by the metropolitan academy of the last third of a century. It has caused mainstream 'social science' to fall like a house of cards. It can only save itself through comprehensive reinvention, from the ground up. ..."
"... Neoliberalism -> c(Globalization, Financialization, Austerity) ..."
"... Just one caveat: Neoliberalism is not really market-fetishism, unless fetishism is understood as fake devotion. Neoliberalism is a State ideology of the economy, its central tenet being that the State must directly help the rich, the poor will be better off as a by-product. ..."
"... Remember, though, that neoliberal social sciences now insists that everything is "post fact". "Post fact" society. "Anti intellectualism". And so on. ..."
"... We can look forward to too post-neoliberslism . - which would be liberalism, as the post and neo cancel out. ..."
"... As early as 1967 Greenspan was well known as an academic whore and a Rockefeller Puppet which now is a vast army of dial up opinions. ..."
"... The author mentions globalization and financialization. But what seems to be always left out (and given a pass) in these discussions is the role of central banks and monetary policy. ..."
"... Central banking policy (always creating more money/credit) lies at the nexus of almost all that is wrong with modern capitalism and is the lubricant and fuel that enables financialization's endless growth. ..."
"... Financialization leads to asset bubbles and deindustrialization. It hollows out industries. When money/credit are created in ever increasing quantity, the makeup of how we "work" shifts from goods producing to "finance". ..."
"... Trump doesn't seem to have grasped the only thing that mattered in his election – you want your enemies to suck. His appointees are people that suck. Hillary would have appointed smooth-talkers who could effortlessly move between "private and public" positions. ..."
"... PS: Paul Ryan is a good counterexample – people fall for his BS because he isn't quite a stupid as, say Guiliani. Of course he was elected, not picked by Trump. ..."
"... mr reddy solves the riddle of the Great Refusal but doesn't far enough: certainly mainstream economists were wrong to act as cheerleaders for the kleptocracy, yet they were also complicit in a material sense by furnishing all the necessary algorithms to boost the derivatives industry into the realm of corporate cyber-theft. ..."
"... Mainstream analysts don't want to recognize the real problem: those who failed the people have lost their legitimacy to govern. ..."
"... We finally made it to the post-modern wasteland. It is pretty weird to see the post-modern methods used by social scientists for decades to dissect culture actually manifest in practiced culture. ..."
"... TINA was definitely an ideology – an idea backed by interest. They were making fun of Thatcherism last nite on France 24 because it had been so devastating and now one of the candidates in France is talking her old trash again. Humor is effective against ideology when all else fails but it takes a while. But as defined above, we actually do have an alternative – our current alternative is "illiberal majoritarianism". Sounds a tad negative. We should just use the word "democracy". ..."
"... "The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive." ..."
"... The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments. ..."
"... Today we are missing that person with creativity and imagination to lead us out of the wilderness and stagnation we have been experiencing since 2008. ..."
"... The work of the Classical Economists and the distinction between "earned" and "unearned" income, also "land" and "capital" need to be separated again (conflated in neoclassical economics) Reading Michael Hudson's "Killing the Host" is a very good start ..."
Nov 26, 2016 | www.nakedcapitalism.com
By Sanjay Reddy, Associate Professor of Economics, The New School for Social Research. Originally published at the Institute for New Economic Thinking website

Grappling with the shock of Donald Trump's election victory, most analysts focus on his appeal to those in the United States who feel left behind, wish to retrieve a lost social order, and sought to rebuke establishment politicians who do not serve their interests. In this respect, the recent American revolt echoes the shock of the Brexit vote in the United Kingdom, but it is of far greater significance because it promises to reshape the entire global order, and the complaisant forms of thought that accompanied it.

Ideas played an important role in creating the conditions that produced Brexit and Trump. The 'social sciences' - especially economics - legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy .

It is never clear whether ideas or interests are the prime mover in shaping historical events, but only ideas and interests together can sustain a ruling consensus for a lengthy interval, such as the historic period of financialization and globalization running over the last 35 years. The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas.

First, there is globalization as we knew it. Mainstream economics championed corporate-friendly trade and investment agreements to increase prosperity, and provided the intellectual framework for multilateral trade agreements. Economics made the case for such agreements, generally rejecting concerns over labor and environmental standards and giving short shrift to the effects of globalization in weakening the bargaining power of workers or altogether displacing them; to the need for compensatory measures to aid those displaced; and more generally to measures to ensure that the benefits of growth were shared. For the most part, economists casually waved aside such concerns, both in their theories and in their policy recommendations, treating these matters as either insignificant or as being in the jurisdiction of politicians. Still less attention was paid to crafting an alternate form of globalization, or to identifying bases for national economic policies taking a less passive view of comparative advantage and instead aiming to create it.

Second, there is financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class.

Financialization also led to the near-abandonment of the 'national' industrial economy in favor of global sourcing and sales, and a handsome financial rentier economy built on top of it. Meanwhile, automation trends led to shedding of jobs everywhere, and threaten far more.

All of this was hardly noticed by the discipline charged with studying the economy. Indeed, it actively provided rationales for financialization, in the form of the efficient-markets hypothesis and related ideas; for concentration of capital through mergers and acquisitions in the form of contestable-markets theory; for the gentrification of the city through attacks on rent control and other urban policies; for remaking of labor markets through the idea that unemployment was primarily a reflection of voluntary leisure preferences, etc. The mainstream political parties, including those historically representing the working and middle classes, in thrall to the 'scientific' sheen of market fetishism, gambled that they could redistribute a share of the promised gains and thus embraced policies the effect of which was ultimately to abandon and to antagonize a large section of their electorate.

Third, there is the push for austerity, a recurrent trope of the 'neoliberal' era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance (though they can paradoxically simultaneously disdain taxation, as with Trumpism). The often faulty intellectual case made by many mainstream economists for central bank independence, inflation targeting, debt sustainability thresholds, the distortive character of taxation and the superiority of private provision of services including for health, education and welfare, have helped to support antagonism to governmental activity. Within this perspective, there is limited room for fiscal or even monetary stimulus, or for any direct governmental role in service provision, even in the form of productivity-enhancing investments. It is only the failure fully to overcome the shipwreck of 2008 that has caused some cracks in the edifice.

The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.]

Finally, interpretations of politics were too restrictive, conceptualizing citizens' political choices as based on instrumental and usually economic calculations, while indulging in a wishful account of their actual conditions - for instance, focusing on low measured unemployment, but ignoring measures of distress and insecurity, or the indignity of living in hollowed-out communities.

Mainstream accounts of politics recognized the role of identities in the form of wooden theories of group mobilization or of demands for representation. However, the psychological and charismatic elements, which can give rise to moments of 'phase transition' in politics, were altogether neglected, and the role of social media and other new methods in politics hardly registered. As new political movements (such as the Tea Party and Trumpism in the U.S.) emerged across the world, these were deemed 'populist'-both an admission of the analysts' lack of explanation, and a token of disdain. The essential feature of such movements - the obscurantism that allows them to offer many things to many people, inconsistently and unaccountably, while serving some interests more than others - was little explored. The failures can be piled one upon the other. No amount of quantitative data provided by polling, 'big data', or other techniques comprehended what might be captured through open-eyed experiential narratives. It is evident that there is a need for forms of understanding that can comprehend the currents within the human person, and go beyond shallow empiricism. Mainstream social science has offered few if any resources to understand, let alone challenge, illiberal majoritarianism, now a world-remaking phenomenon.

Trumpism is a crisis for the most prestigious methods of understanding economic and social life, ennobled and enthroned by the metropolitan academy of the last third of a century. It has caused mainstream 'social science' to fall like a house of cards. It can only save itself through comprehensive reinvention, from the ground up.

KK November 26, 2016 at 5:41 am

I was surprised at how reasonable my plumber's quote was and when l asked him about this, he said that he couldn't increase his prices or the work would go to 'Eastern Europeans' who continued to undercut him. Wasn't it plumbing and hairdressing that we got taught about in 1970's economics classes as not being subject to international competition?

rd November 26, 2016 at 9:49 am

Both plumbing and appliance repair are becoming disassemble and reassemble jobs. You don't fix a faucet anymore. You just take the old one out and put and new one in because that is cheaper than repairing. Same with many appliances. Even the repairs are taking out an entire part or circuit board and no dropping a new one in.

So the skill set now is diagnosis and occasionally brute strength to take apart the old joint.

ambrit November 26, 2016 at 9:58 am

Yep, those were supposedly "immigrant proof" occupations. Hah! Were we ever wrong!

It turns out that even "skilled labour," into which, much to their dismay, technical occupations are now included, is subject to wage suppression by importation of cheaper workers. The fact that there is a H1B visa program at all should tell us something fundamental about the amoral character of management labour relations in America.

fresno dan November 26, 2016 at 3:42 pm

ambrit

November 26, 2016 at 9:58 am

http://www.marketwatch.com/story/shortage-of-mexican-workers-is-hurting-us-businesses-2016-11-25

Many business owners who rely on low-skilled labor say the real trouble is too few Mexicans heading north, not too many. "Without Mexican labor our industry is at a standstill," says Nelson Braddy Jr., the owner of King of Texas Roofing Co., which is helping build a sprawling new Toyota North American headquarters in a Dallas suburb. He says he would hire 60 roofers right away if he could find them. "It's the worst I have seen in my career," he adds.

========================================================
The CEPR also talks about low wages
http://cepr.net/blogs/beat-the-press/what-happened-to-job-killing-robots-businesses-complain-about-shortage-of-low-skilled-workers?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29

I think the comments are better than the article, in that the commenters simply state that the upper class and government are in cahoots to keep wages low.

ambrit November 26, 2016 at 4:39 pm

You are onto something here. I always wondered if the suppression of wages would lead to a decline in the population of people even willing to learn a task due to a perceived lack of incentive to make the effort. This would work alongside a seldom mentioned fact; the limits to the supply of appropriately skilled "foreigners" to perform a task. The resultant mix must be generating an industry of active recruiters in foreign lands for in demand, for less, skill sets. I would lay money on the bet that eventually, things will reach the point where criminal activities make more sense than the miserable jobs on offer.

John Wright November 26, 2016 at 5:04 pm

I know someone who had a small roofing company in Los Angeles.

Some time ago he commented that he had not been able to raise his labor rates in 20 years.

He also had a wry comment about the glass ceiling in roofing, saying that there are no women in roofing, but there is no apparent societal pressure to break this version of the glass ceiling.

Roofing is a hazardous job, requiring working outside in all types of weather, for low pay.

But if the pay is high enough, even hazardous jobs, with weather exposure, are prized, as one can witness watching NFL football.

The Cleaner November 26, 2016 at 8:01 pm

I don't think these were considered "immigrant proof" as much as "outsourcing proof" which makes sense if you think about it.

Sandy November 26, 2016 at 10:12 am

Important to note there's quite a lot of Europeans who stay illegally in the US by entering on the visa waiver program as tourists and simply overstaying. Irish and eastern Europeans especially. If you're in the Northeast it's common to see Irishmen working maintenance jobs at buildings here, or as bartenders or other cash jobs – 90% are going to be out of status. But this issue gets almost zero media attention.

sunny129 November 26, 2016 at 5:12 pm

'But this issue gets almost zero media attention'

If I mentioned "colored skin' stands out than those of Europeans, will I be labelled racist?

Whenever there is immigration raid,on an establishment 'brown & blacks'(illegals!) ran out but NOT the fair skinned Europeans, who were always confident that they won't be affected or bothered! And they were 100% right!

Seen it, been there and fed up with it!

Dignan November 26, 2016 at 2:38 pm

I'm told by my father that in Berkely Springs, West Virginia, men can get haircuts for as little as $1.75. Perhaps these are eastern European barbers? More likely it is simply a product of the crushing desperation we see in our broken economy. But hey, unemployment is under 5% so everything's fine, right? The dismal science indeed.

His Grace November 26, 2016 at 5:47 am

Bravo!

Ruben November 26, 2016 at 6:20 am

Neoliberalism -> c(Globalization, Financialization, Austerity)

Just one caveat: Neoliberalism is not really market-fetishism, unless fetishism is understood as fake devotion. Neoliberalism is a State ideology of the economy, its central tenet being that the State must directly help the rich, the poor will be better off as a by-product.

So if the push of the populace is strong enough, a new State ideology of the economy (aka mainstream economic dogma) would develop around the concepts of Self-suficiency (as opposed to Globalization), Industrialism (as opposed to Financialization), and Stimulus (as opposed to Austerity). Probably MMT has something to say about the latter, but what about Self-sufficiency and Industrialism?

BecauseTradition November 26, 2016 at 10:26 am

its central tenet being that the State must directly help the rich, the poor will be better off as a by-product. Ruben

Yes, government-subsidized* private credit creation being a (the?) prime example of this.

*e.g. forcing the poorer to lend (a deposit is legally a loan) to banks to lower the borrowing costs of the more so-called creditworthy, the richer, or else be limited to dealing with unsafe, inconvenient physical fiat, cash.

Disturbed Voter November 26, 2016 at 8:33 am

The Academy are direct and indirect employees of the State. The Ivy League are direct and indirect employees of plutocrats (thru the university endowment). The State officials are plutocrats or more commonly indirect employees of the plutocrats. What is not to like? How can the Academy be reformed, when it has been oligarchic since Plato (an oligarch) invented it the first Rand Corporation

cnchal November 26, 2016 at 8:46 am

Who knew that destroying little people's lives would finally have consequences?

Prrresidennntt Trrrummppp (just rolls off the tongue) can have a field day.

When do the mass firings of inept economists begin? Starting with Larry "Pretty Air" Summers and all the rest of the Haaaarvaaard asshats.

ambrit November 26, 2016 at 10:01 am

I want to know when those characters will be sent to the FEMA camps for "re-education?" Something with a faint affinity to the Cultural Revolution looms.

ambrit November 26, 2016 at 4:46 pm

Reactionaries will be purged. The Markets of Historical Determinism will demand it.
Cut to view of parade down Main Street USA of politicians and business people with computer keyboards hung around their necks. Many wear signs around their necks proclaiming their crimes. "I facilitated consumers to buy insurance policies for the ACA," says one. "I front ran the market for Uncle Sam," says another. The lines of armed guards lining the parade route are there to protect the penitents, as various short action shots show. The crowd is in an ugly mood. Storm clouds lower in the distance.

cocomaan November 26, 2016 at 8:47 am

Remember, though, that neoliberal social sciences now insists that everything is "post fact". "Post fact" society. "Anti intellectualism". And so on.

Synoia November 26, 2016 at 11:30 am

We can look forward to too post-neoliberslism . - which would be liberalism, as the post and neo cancel out.

Damian November 26, 2016 at 9:27 am

Tell me where you want to go and I'll provide the selective facts and the subjective interpretation of those facts to reach the desired conclusions = Economists

-- or merely arbitrarily change the cell definitions in excel as Harvard economists Carmen Reinhart and Kenneth Rogoff.

As early as 1967 Greenspan was well known as an academic whore and a Rockefeller Puppet which now is a vast army of dial up opinions.

fresno dan November 26, 2016 at 9:31 am

From the article:
"Ideas played an important role in creating the conditions that produced Brexit and Trump. The 'social sciences' - especially economics - legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy."

Yesterday I posted a link from Krugman saying that manufacturing CANNOT be restored in the US.
Not that laws, rules, trade agreements make it difficult, but that something akin to the "arrow of time" or entropy prevents it – " that there was no alternative." Which is why I so vehemently disagree with the man. 1st, economics is not a physical science. 2nd, the loss of manufacturing in this country is due to man made conventions. Men made the rules, men can unmake the rules.

Just like prohibition was thought to be a good idea, but with the passage of time, it was revealed that whatever benefits arise of not drinking, it is more than offset by the setbacks.
I used to believe in "free trade" – but a thing called reality whacked me upside the head and disabused me of the notion. Whether GDP is going up fast enough or not, there is overwhelming evidence that the vast majority of GDP is not distributed to the 90% of the members of society.

Like a lot of things, we did the experiment – it doesn't work, but a few who gain advantage by that state of affairs want it to continue. The emperor has been exposed as having no clothes, and once you see the nakedness, you can't unsee it.

vlade November 26, 2016 at 12:45 pm

of course you could institute that all manufacturng used 1960s technology – or maybe even 1860s, that would generate even more jobs.
short of doing that, todays higly automated factory will use about tenth of blue collar workforce than in 1960s with the same productivity but creating much more complex products.
I've seen reshoring happen (into compartively high labour cost country) and it created a thousand jobs or so. the previus offshoring costed close to five or six thousands iirc.

fresno dan November 26, 2016 at 3:45 pm

vlade
November 26, 2016 at 12:45 pm

Than why are so many Chinese employed doing it

Optimader November 26, 2016 at 6:15 pm

FD
Because they are paid next to nothing by 1st world standards.
Even so, Chinese policy makers realise they are in a state of "peak labor". Flogging productivity with a policy of "many hands make project small" has hit it's scaling potential. They understand that.

https://roboticsandautomationnews.com/2016/09/23/chinese-whispers-the-most-populous-nation-on-earth-wants-to-replace-millions-of-human-workers-with-industrial-robots-it-plans-to-manufacture/7353/

John Wright November 26, 2016 at 1:07 pm

I work in the electronics industry and had a minor observation point for some of the outsourcing of electronics manufacturing from the USA to, primarily, Asia, starting in the late 1980's.

At first USA employees were told not to worry as only excess capacity would be built overseas.

But, that was proven to be an optimistic(?) statement, as even the managers making these statements also disappeared.

If one looks at the value of raw electronic "ingredients" produced in Asia, for example, Printed Circuit Boards (PCBs), one can see how much capacity has been built up overseas.

Here are some numbers pulled from report I have access to:

For 2015, 26.5 billion dollars of PCB's were produced in China.

Taiwan and South Korea produce 7.8Billion and 7.3billion respectively.

Even high priced Japan produces 5.36 billion dollars of PCB's

The North American number is 2.846 billion.

China + Japan + Taiwan + South Korea +Other Asia = .51.94 billion vs 2.8 billion in North America.

So Asia produces 18.55 x as much dollar volume of PCBs than North America (Canada + USA)

In my simple minded labor model, when a country allows very free migration of capital overseas, importation of foreign workers by migration or temporary visas and outsourcing of labor by computer networks to overseas workers, it seems implausible one would argue that USA wages would not tend lower in response.

But we have Obama and numerous economists, pushing the Free Trade mantra, via TPP, as good for American workers.

And a further factor is the US military and State Department strive to make it safer for American businesses to function anywhere in the world, lowering business risk while pitching increased national security to the USA population (who bears the military cost).

It will be difficult to bring American manufacturing back, especially when the alleged high paying white collar college jobs are pushed as the solution to USA wage stagnation.

susan the other November 26, 2016 at 1:07 pm

Steve Keen said similarly in Forbes – that once you offshore an industry it is too expensive to reinstall, and that some old factory for making furnaces cannot be retooled to make textiles, etc. even tho' you might have a comparative advantage for doing textiles – sounds like corporate raiding and big time looting more and more because once you devastate an industry you really cannot do anything economically with those facilities and those workers.

Which explains why after clever men like Mitt Romney finish with your corporation's takeover nobody dashes in to re-up something new. Like pulling a tree out by its roots and then expecting it to grow into some kinda shrub.

a different chris November 26, 2016 at 9:09 pm

Well I like Steve Keen but he and PK are finally on the same page, where neither knows not what the f he is talking about.

A lot of "offshoring" of the steel industry happened as the US plants themselves were passing the "invest or wind down" point in their life. Since the US labor force was considered intractable and foreign governments had much newer facilities the TPTB in steel just punted on US manufacturing. I am going to try to find a link, but there was a lot of debate between the union and US Steel (? one of them? ) about building a continuous caster plant in the 70's. Foreign companies had them, we didn't. I think they didn't, but the point is the, all other things being equal, any plants of any type of manufacturing go thru the same technological vs ageing cycle, and the US is as likely to gain "back" - quotes because like continuous casting, it's steelmaking but not the same as before - an industry as it is to have lost it in the first place. Factories like to be located where they make sense.

And what is all this about "well they don't need anybody in manufacturing, it's all gonna be machines now". Yeah, right. Been on a manufacturing floor lately? People have yet to be born that are going to be working in something called "manufacturing". And if the machines cut the work need by 10x, we may well need 10x as much stuff as long as it is the right stuff.

Well, if we had universal heathcare and Germanic trade education, but that would require elections not between carrot-heads and Queen Wannabes.

nothing but the truth November 26, 2016 at 9:26 pm

hang on. why can manufacturing work in germany but not in the US?

Actus Purus November 26, 2016 at 10:35 am

The author mentions globalization and financialization. But what seems to be always left out (and given a pass) in these discussions is the role of central banks and monetary policy.

Central banking policy (always creating more money/credit) lies at the nexus of almost all that is wrong with modern capitalism and is the lubricant and fuel that enables financialization's endless growth.

Financialization leads to asset bubbles and deindustrialization. It hollows out industries. When money/credit are created in ever increasing quantity, the makeup of how we "work" shifts from goods producing to "finance".

Then through globalization, what we lack in goods, foreigners who accept our paper, seem to provide. At least for now. In a closed system, financialization has its natural limits. But enabled by cross-border trade, it metastasizes.

In the short run, it appears to be a virtuous circle. We print paper. They make real stuff. They take our paper. We take their stuff. We feel very clever.

But over time, wealth inequality grows. Industries are hollowed out. The banking sector dominates.

And then we get a populist uprising because people realize "something is wrong".

But mistakenly, they think it's globalization. Or free trade. Or capitalism. When all along, it's just central banking. Central banks are the problem. Central bankers are the culprits.

BecauseTradition November 26, 2016 at 4:56 pm

Central banks are the problem. Actus Purus

Yes, insofar as they create fiat for the private sector since that is obviously violation of equal protection under the law in favor of the banks and the rich.

Otoh, all citizens, their businesses, etc. should be allowed to deal directly in their nation's fiat in the form of account balances at the central bank or equivalent and not be limited to unsafe, inconvenient physical fiat, a.k.a. cash.

stefan November 26, 2016 at 10:38 am

Get ready for real kleptocracy.

Breitbart obscurantism + Trump/Bannon misdirection = turkeys vote for thanksgiving.

Sessions views on race at Justice = curtailed civil rights. Wilbur Ross pension stripping = privatize Social Security. DeVos at education = privatize the golden egg of public education. 85% tax credit for private infrastructure spending = fire sale of the public square (only rich need apply).
3~4 Military generals in the cabinet = enforcement threat for crypto-fascist state.

McGahn at counsel + Pompeo at CIA = Koch Bros.

Ryan at speaker = privatize Medicare

Welcome to government of the billionaires, by the billionaires, for the billionaires.

btw, if Giuliani is appointed to a cabinet post, he will have to explain his foreknowledge of the NY FBI→Kallstrom→Comey connection→to Congress under oath (if they aren't too afraid to ask).

a different chris November 26, 2016 at 9:15 pm

I worry along with you, but again: When somebody Ms DeVos opens her mouth people just naturally recoil. Trump doesn't seem to have grasped the only thing that mattered in his election – you want your enemies to suck. His appointees are people that suck. Hillary would have appointed smooth-talkers who could effortlessly move between "private and public" positions.

PS: Paul Ryan is a good counterexample – people fall for his BS because he isn't quite a stupid as, say Guiliani. Of course he was elected, not picked by Trump.

Robert Dannin November 26, 2016 at 10:41 am

mr reddy solves the riddle of the Great Refusal but doesn't far enough: certainly mainstream economists were wrong to act as cheerleaders for the kleptocracy, yet they were also complicit in a material sense by furnishing all the necessary algorithms to boost the derivatives industry into the realm of corporate cyber-theft.

That genie isn't going back into bottle. what's in store for us then? economic apartheid. just read what the new team has been saying about walls, guns, police, military and terrorism. the bannon plan is for heavily policed gated communities monopolizing vital resources; high surveillance, rights abatement zones for the proletariat; and a free-fire wilderness of lumpen gangsters, gun-toting vigilantes, survivalist cults, etc. competing for subsistence. mad max, only run by people worse than mel gibson. close to what we already have but once legislated into existence impossible to reverse without a violent revolution. once again mr. reddy is correct: hobbes' leviathan is the negation of social science.

Waldenpond November 26, 2016 at 11:39 am

hmmmm .. Trump said quite a few contradictory things during his campaign and it would seem an error to believe anything a candidate says on either side of an issue. Have the Koch brothers (who are involved w/Trump) been particularly unhappy with the numerous billions they've accumulated under Obama? I expect this regime to be more along the 'different globalization' side (more a shuffling of the deck chairs on the Titanic). Manufacturing will be back in relation to the degree – penalties are eliminated on 'repatriated' funds, land is eminent domained on behalf of oligarchs, private profit is granted primacy over pollution, then build their factories with public money and abolish the minimum wage. Austerity will continue but the new con will be private/public partnerships. Don't you want to buy you friend/family member/neighbor a job? Don't you?

The elite, including the Trump's, are going to continue their actions until they've taken it all.

Wendell Fitzgerald November 26, 2016 at 1:06 pm

Since you mention land you might be interested in the idea of land value taxation a way to take the land back from the oligarchs an idea that has been around for a long time assiduously ignored by folks like Naked Capitalism.

JEHR November 26, 2016 at 5:35 pm

Mr. Fitzgerald, if you search in NC for "land value taxation" you will see many articles, especially from Mr. Hudson. NC has thoroughly covered a lot of territory regarding this topic.

a different chris November 26, 2016 at 9:24 pm

Yes you could probably catch us restlessly muttering "Henry George" in our sleep half the time.

The problem is it's a really, really hard sell. It just sounds funny. Pittsburgh actually had it until a few years ago when it was "discovered" and before there was even a discussion the Democratic mayor and City Council who should have known better had rescinded it before anybody got a chance to say anything.

https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_States

" during 2001 after years of underassessment, and the system was abandoned in favor of the traditional single-rate property tax. The tax on land in Pittsburgh was about 5.77 times the tax on improvements."

To be good Russian plants, we do actually need to know things about Amerika Anyway, here's the problem: people just voted for a billionaire how you gonna get this type of taxation approved given the Pittsburgh example?

Altandmain November 26, 2016 at 11:47 am

Mainstream analysts don't want to recognize the real problem: those who failed the people have lost their legitimacy to govern.

Not saying Trump is the solution (I'm hoping for a solution from the left and think that Trump could enable his cronies, but nothing else), but the Establishment is unworthy to govern.

Wendell Fitzgerald November 26, 2016 at 1:24 pm

A solution that most people would consider being from the left but which is the radical center (taking valid ideas from both left and right) is land value taxation the wedge issue to tax the various sources of unearned income (estimated at 40+% of GNP however you determine it) thus allowing for the elimination of taxation of earned income from wages and profit from the investment of real capital in the real economy.

Taxing community created land value and making the distinction between earned and unearned income has been assiduously ignored and avoided by mainstream economists, most of our vaunted/sainted public intellectuals and sources like naked capitalism but since all of that has failed there is nothing to lose by considering what this author, Sanjay Reddy, says is necessary: "It [social science] can only save itself through comprehensive reinvention, from the ground up."

I suggest that the this has already been done literally from the ground up by the analysis that has been around for a very long time that takes land, how its value is created, who owns it and what happen when you tax its value into account. Happy day.

Rosario November 26, 2016 at 12:45 pm

We finally made it to the post-modern wasteland. It is pretty weird to see the post-modern methods used by social scientists for decades to dissect culture actually manifest in practiced culture.

susan the other November 26, 2016 at 1:14 pm

TINA was definitely an ideology – an idea backed by interest. They were making fun of Thatcherism last nite on France 24 because it had been so devastating and now one of the candidates in France is talking her old trash again. Humor is effective against ideology when all else fails but it takes a while. But as defined above, we actually do have an alternative – our current alternative is "illiberal majoritarianism". Sounds a tad negative. We should just use the word "democracy".

Sound of the Suburbs November 26, 2016 at 2:39 pm

The problem with free trade, a historical lesson:

"The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive."

The landowners wanted to increase their profit by charging a higher price for corn, but this posed a barrier to international free trade in making UK wage labour uncompetitive by raising the cost of living for workers. In a free trade world the cost of living needs to be the same in West and East as this sets the wage levels.

The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

These costs all have to be covered by wages and US businesses are now squealing about the high minimum wage. US labour can never compete with Eastern labour and will have to be protected by tariffs. Free trade has requirements and you must meet them before you can engage in free trade.

The cost of living needs to be the same in West and East.

Sound of the Suburbs November 26, 2016 at 2:43 pm

There are two certainties in life – death and taxes.

There are two certainties about new versions of capitalism; they work well for a couple of decades before failing miserably.

Capitalism mark 1 – Unfettered Capitalism

Crashed and burned in 1929 with a global recession in the 1930s.
The New Deal and Keynesian ideas promised a bright new world.

Capitalism mark 2 – Keynesian Capitalism

Ended with stagflation in the 1970s.
Market led Capitalism ideas promised a bright new world.

Capitalism mark 3 – Unfettered Capitalism – Part 2 (Market led Capitalism)

Crashed and burned in 2008 with a global recession in the 2010s.

We are missing the vital ingredient. When the first version of capitalism failed, Keynes was ready with a new version. When the second version of capitalism failed, Milton Freidman was waiting in the wings with his new version of capitalism.

Elites will always flounder around trying to stick with what they know, it takes someone with creativity and imagination to show the new way when the old way has failed.

Today we are missing that person with creativity and imagination to lead us out of the wilderness and stagnation we have been experiencing since 2008.

Sound of the Suburbs November 26, 2016 at 2:45 pm

What is missing from today's economics?

  1. The work of the Classical Economists and the distinction between "earned" and "unearned" income, also "land" and "capital" need to be separated again (conflated in neoclassical economics) Reading Michael Hudson's "Killing the Host" is a very good start
  2. How money and debt really work. Money's creation and destruction on bank balance sheets.
  3. The work of Irving Fisher, Hyman Minsky and Steve Keen on debt inflated asset bubbles
  4. The work of Richard Koo on dealing with balance sheet recessions https://www.youtube.com/watch?v=8YTyJzmiHGk
  5. The realisation that markets have two modes of operation: a) Price discovery b) Bigger fool mode, where everyone rides the bubble for capital gains

There may be more

The Euro was designed with today's defective economics. Oh dear, no wonder it's going wrong.

a different chris November 26, 2016 at 9:29 pm

>The Euro was designed with today's defective economics.

Man I didn't think of that. What comically lousy timing. I do like this post because it similar to sigh, ok it asserts my belief but still don't think I'm in an echo chamber here, I actually want people to know what I think so they can reinforce the good and whittle out the bad anyway, asserts my belief that "economics" isn't a science but when used in the best way is a toolkit, here we need an hammer (austerity), here we need a screwdriver (some tweaking). It isn't one tool for all jobs for all time.

UserFriendly November 26, 2016 at 8:09 pm

I disagree that we don't have a ready to go replacement. MMT. We just have TPTB throwing $$$ around to make sure no one hears about it, much less does anything.

[Nov 26, 2016] EconoSpeak Comments on Milanovic on Marx

Nov 26, 2016 | econospeak.blogspot.com

I am a Marxist economist (Professor of Economics, Mount Holyoke College) and I appreciate Branko Milanovic's open-mindedness and his efforts in a recent post on his blog to educate economists who often have a crude and superficial misunderstanding of Marx's labor theory of value.

For context for my comments on Milanovic, I will first say a few words about my interpretation of Marx's labor theory of value (LTV). In my view, Marx's LTV is primarily a macro theory and the main question addressed in Marx's macro LTV is the determination of the total profit (or surplus-value) produced in the capitalist economy as a whole. Profit is the main goal of capitalist economies and should be a key variable in any theory of capitalism. Marx's theory of the total profit is that profit is the difference between the value produced by workers and the wages they are paid, i.e. that profit is produced by the "surplus labor" of workers.

I argue that Marx's "surplus labor" theory of profit has very significant and wide-ranging explanatory power. Marx's theory provides straight-forward and robust explanations of the following important phenomena of capitalist economies: conflicts between capitalists and workers over wages, and over the length of the working day, and over the intensity of labor (i.e. how hard workers work, which determines in part how much value they produce); endogenous technological change (in order to reduce necessary labor and increase surplus labor and surplus-value); increasing concentration of capital and income(i.e. increasing inequality); the trend and fluctuations in the rate of profit over time; and endogenous cycles due to fluctuations in the rate of profit rate of profit. (A more complete discussion of the explanatory power of Marx's theory of profit is provided in my " Marx's Economic Theory: True or False? A Marxian Response to Blaug's Appraisal, " in Moseley (ed.), Heterodox Economic Theories: True or False?, Edward Elgar, 1995).

This wide-ranging explanatory power of Marx's surplus labor theory of profit is especially impressive when compared to mainstream economics. In mainstream macroeconomics, there is no theory of profit at all; profit (or the rate of profit) is not even a variable in the theory! I was shocked when I realized in graduate school this absence of profit in mainstream macro, and am still shocked that there is no effort to include profit. Indeed, DSGE models go in the opposite direction and many models do not even have firms!

Mainsteam micro does have a theory of profit (or interest) – the marginal productivity theory of distribution – but it is a weak and largely discredited theory. Marginal productivity theory has been shown by the capital controversy and other criticisms to have insoluble logical problems (the aggregation problem, reswitching, cannot integrate intermediate goods, etc.). And marginal productivity theory has very meager explanatory power and explains none of the important phenomena listed above that are explained by Marx's theory.

Milanovic agrees that Marx's LTV is primarily a macro theory, but he interprets it in this post as only the assumption that "sum of values will be equal to sum of production prices". And he continues: "The former is an unobservable quantity so Marx's contention is not falsifiable. It is therefore an extra-scientific statement that we have to take on faith.

I argue, to the contrary, that Marx's macro LTV is primarily a theory of profit and my conclusion that Marx's theory is the best theory of profit we have is not based on faith but is instead based on the standard scientific criterion of empirical explanatory power. It is much more accurate to say that marginal productivity theory is accepted by mainstream economists on faith, as Charles Ferguson famously said in his conclusion to the capital controversy.

Now to my comments on Milanovic's three main points:

1. Milanovic's main point is that the LTV is often misinterpreted as a simple micro theory that assumes that the prices of individual commodities are proportional to the labor-times required to produce them. Milanovic argues that is not true in a capitalist economy because of the equalization of the profit rate across industries with unequal ratios of capital to labor, so that according to Marx's theory, long-run equilibrium prices are determined by the equation: w + d + rK, where w is wages, d is depreciation and r is the economy-wide rate of profit (missing in this equation is the cost of intermediate goods, but I will ignore this).

Milanovic emphasizes that Walras and Marshall had essentially the same equation for long-run equilibrium prices. I agree that all three theories of long-run equilibrium prices have this same form, but there is an important difference. Marx's theory provides a logically rigorous theory of the rate of profit in this equation (based on his theory of the total profit discussed above) and Walras and Marshall just take the rate of profit as given , disguised as an "opportunity cost", and thus provides no theory of profit at all . Therefore, I think Marx's theory of long-run equilibrium prices is superior to Walras' and Marshall's in this important sense.

2. Milanovic's second main point is that Marx's theory of long-run equilibrium prices are "clearly very, very far from derisive statements that the labor theory of value means that people are just paid for their labor input regardless of what is the 'socially necessary labor' required to produce a good." I presume that this derisive statement means that workers produce more value than they are paid and thus are exploited in capitalism. But Branko is mistaken about this. Marx's theory of long-run equilibrium prices is based on his macro theory of profit according to which the source of profit is the surplus labor of workers. This conclusion is indeed derisive and that is the main (non-scientific) reason that Marx's theory of profit is rejected by mainstream economists in spite of its superior explanatory power.

I know from previous correspondence that Milanovic understands well Marx's "exploitation" theory of profit, but he seems to overlook the connection between Marx's micro theory of prices of production and his macro theory of profit.

3. Milanovic's third point is that Marx's labor theory of value is most helpful in understanding pre-capitalist economies and the relation between capitalism and non-capitalist economies today. I argue, to the contrary, that Marx's labor theory of value and profit is the best theory we have to understand the most important phenomena of capitalist economies, including 21 st century capitalism.

It would be one thing if mainstream economics had a robust theory of profit with significant explanation power. But it has almost no theory of profit. Therefore it would seem to be appropriate from a scientific point of view that Marx's surplus labor theory of profit should be given more serious consideration.

Thanks again to Milanovic and I look forward to further discussion.

[Nov 26, 2016] Lysenkoism in the USA: Krugman and other neoliberal economists role in suppression of science.

likbez

I used to respect Krugman during Bush II presidency. His columns at this time looked like on target for me. No more.

Now I view him as yet another despicable neoliberal shill. I stopped reading his columns long ago and kind of always suspect his views as insincere and unscientific. In this particular case the key question is about maintaining the standard of living which can be done only if manufacturing even in robotic variant is onshored and profits from it re-distributed in New Deal fashion. Technology is just a tool. There can be exception for it but generally attempts to produce everything outside the US and then sell it in the USA lead to proliferation of McJobs and lower standard of living. Creating robotic factories in the USA might not completely reverse the damage, but might be a step in the right direction. The nations can't exist by just flipping hamburgers for each other.

Actually there is a term that explains well behavior of people like Krugman and it has certain predictive value as for the set of behaviors we observe from them. It is called Lysenkoism and it is about political control of science.

See, for example:
https://en.wikipedia.org/wiki/Lysenkoism
http://www.softpanorama.org/Skeptics/lysenkoism.shtml

Yves in her book also touched this theme of political control of science. It might be a good time to reread it. The key ideas of "ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism " are still current.

[Nov 26, 2016] Economist's View Paul Krugman The Populism Perplex

Nov 26, 2016 | economistsview.typepad.com
William Meyer : , November 25, 2016 at 10:32 AM
According to Kevin Drum, a big Hillary supporter, the class issue was real.

"The net loss here is about 2 points of the total vote. It's true that among the working class Clinton lost more among whites than nonwhites, but she lost big among all races. This strongly suggests that the working class was primarily motivated by economic concerns and only secondarily by racial issues. This is the opposite of what I thought during the campaign, but I was wrong."

Per Mr. Kaufman, who I generally respect, the Dems may have to push something directed at the working class in areas hard hit in the last 20 post Nafta years. Maybe trade adjustment public works program and education investment. I mean they need something to offer here.

William Meyer : , November 25, 2016 at 10:47 AM
Sorry I didn't give a link to the Drum piece. You can read the whole thing at:

http://www.motherjones.com/kevin-drum/2016/11/why-clinton-lost-bitter-bernie-crooked-comey-and-wounded-working-class

I should mention Drum also blames millenial lack of enthusiasm for Hillary, which he blames on Bernie, and James Comey.

Dan Berg : , November 25, 2016 at 10:54 AM
" The only way to make sense of what happened is to see the vote as an expression of, well, identity politics - some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn't) and anger ... at liberal elites whom they imagine look down on them.
To be honest, I don't fully understand this resentment"

This epitomizes Professor Krugman and NYTs generally; no matter one's view of Trump, understanding the world in which we find ourselves is not to be found here.

Tom aka Rusty : , -1
Most of the workers, including my friends and relatives, have never read a single economics paper - but they do understand something - their paycheck.

They understand losing a job. They understand bill collectors. They understand patching up the Chevy one more time.

Krugman is desperate to make this about racism. Or class. Or something other than the empty factories.

[Nov 25, 2016] Anti Russian warriors created valueable set of sites that fight that fight neocon/neoliberal propaganda

For them neocon/neoliberal propaganda 24/7 is OK, but pro-Russian propaganda is not. Viva to McCarthyism! The hint is that you do not have a choice -- Big Brother is watching you like in the USSR. Anti-Russian propaganda money in action. It is interesting that Paul Craig Roberts who served in Reagan administration is listed as "left-wing"... Tell me who is your ally ( Bellingcat) and I will tell who you are...
As Moon of Alabama noted "I wholeheartedly recommend to use the list that new anonymous censorship entity provides as your new or additional "Favorite Bookmarks" list. It includes illustrious financial anti-fraud sites like Yves Smith's Naked Capitalism , Wikileaks , well informed libertarian sites like Ron Paul and AntiWar.com and leftish old timers like Counterpunch . Of general (non-mainstream) news sites Consortiumnews , run by Robert Parry who revealed the Iran-contra crimes, is included as well as