|Contents||Bulletin||Scripting in shell and Perl||Network troubleshooting||History||Humor|
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|
|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
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
“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
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:
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.
"Appetite comes with eating" and banks which initially rise as an alternative to usury gradually became indistinguishable from them, the new usury (vampire squid as Matt Taibbi called GS).
Financial institutions brass became dominant political force partially displacing (or more correctly complementing) media-military-industrial complex and oil-energy complex... Sen. Dick Durbin, on a local Chicago radio station blurted out an obvious truth about Congress which, despite being quite obvious, is rarely spoken "press scorps" :
“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”
In other words the US political system is a brand of corporatism with financial capital standing on the top stop on interval to Washington, DC corporate hierarchy and holding the most of political power.
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.
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|
|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 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:
The measure, which Mr. Gramm helped write and move through the Senate, also split up oversight of conglomerates among government agencies. The Securities and Exchange Commission, for example, would oversee the brokerage arm of a company. Bank regulators would supervise its banking operation. State insurance commissioners would examine the insurance business. But no single agency would have authority over the entire company.
"There was no attention given to how these regulators would interact with one another," said Professor Cox of Duke. "Nobody was looking at the holes of the regulatory structure."
The arrangement was a compromise required to get the law adopted. When the law was signed in November 1999, he proudly declared it "a deregulatory bill," and added, "We have learned government is not the answer."
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.
So what we are experiencing is a the completion of the transformation of one phase of capitalism to another. It happened in stages:
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.
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.
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,)
Commercial banks turned into investment banks to exploit this opportunity.
Financial sector completely corrupted academic science converting most economists to pay prostitutes
which serve their interests.
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.
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.
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.
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.
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.
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.
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).
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:
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."
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.
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:
- reduce the growth of government spending,
- reduce marginal tax rates on income from labor and capital,
- reduce government regulation of the economy,
- 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.
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.
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." 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.
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").
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:
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
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
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
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:
A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.
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."
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.
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)  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.
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.
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.”
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.
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.
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.
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.
"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."
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.
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 PodmoreLoyd E. Eskildson
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
- there is no such thing as a free market;
- the washing machine has changed the world more than the internet has --[ I respectfully disagree --NNB];
- we do not live in a post-industrial age;
- globalization isn't making the world richer;
- governments can pick winners;
- some rules are good for business;
- US (and British) CEOs are overpaid;
- more education does not make a country richer;
- and equality of opportunity, on its own, is unfair.
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.
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:
- "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.
- "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).
- "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.
- "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.)
- "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.)
- "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.
- "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.
- "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 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.
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.
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.
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.
The Bush administration was providing an open invitation to excessive borrowing and lending—not that American consumers needed any more encouragement.
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.
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.
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."
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:
- (a) Let financial markets sort themselves out, but with rock solid backing for bank depositors, pension funds and public institutions. The public purse should not be used to bail out - directly or indirectly - speculators in hedge funds, private equity funds and the like. Those that live by the leverage sword can defend themselves or perish by credit destruction.
- (b) Revamp public policy towards increasing earned income for working people.
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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Oct 26, 2016 | crookedtimber.orgstevenjohnson
This is a very good analyses. But I am less pessimistic: the blowback against neoliberal globalization is real and it is difficult to swipe it under the carpet.
There are some signs of the "revolutionary situation" in the USA in a sense that the neoliberal elite lost control and their propaganda loss effectiveness, despite dusting off the "Red scare" trick with "Reds in each computer" instead of "Reds under each bed". With Putin as a very convenient bogeyman.
As somebody here said Trump might be a reaction of secular stagnation, kind of trump card put into play by some part of the elite, because with continued secular stagnation, the social stability in the USA is under real threat.
But it looks like newly formed shadow "Committee for Saving [neo]Liberal Order" (with participation of three latter agencies, just read the recent "Red scare" memorandum ( https://www.dni.gov/index.php/newsroom/press-releases/215-press-releases-2016/1423-joint-dhs-odni-election-security-statement ) want Hillary to be the POTUS.
But the problem is that Hillary with her failing health is our of her prime and with a bunch of neocons in key positions in her administration, she really represents a huge threat to world peace. She might not last long as the level of stress inherent in POTUS job make it a killing ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease. But that might make her more impulsive and more aggressive (and she always tried to outdo male politicians in jingoism, real John McCain is the red pantsuit).
All-in-all it looks like she in not a solution for neoliberal elite problems, she is a part of the problem
Adventurism of the US neoliberal elite, and especially possible aggressive moves in Syria by Hillary regime ("no fly zone"), makes military alliance of Russia and China very likely (with Pakistan, Iran and India as possible future members). So Hillary might really work like a powerful China lobbyist, because the alliance with Russia will be on China terms.
Regime change via color revolution in either country requires at dense network of subservient to the Western interests and financed via shadow channels MSM (including TV channels), strong network of NGO and ability to distribute cash to selected members of the fifth column of neoliberal globalization. All those condition were made more difficult in Russia and impossible in mainland China. In Russia the US adventurism in Ukraine and the regime change of February 2014 (creation of neo-fascist regime nicknamed by some "Kaganat of Nuland" (Asia Times http://www.atimes.com/atimes/Central_Asia/CEN-01-100315.html )) essentially killed the neoliberal fifth column in Russia and IMHO it no longer represent a viable political force.
Also Russians probably learned well lesson of unsuccessful attempt of regime change by interfering into Russian Presidential election process attempted by Hillary and Obama in 2011-2012. I would like to see the US MSM reaction if Russian ambassador invited Sanders and Trump into the embassy and promised full and unconditional support for their effort to remove criminal Obama regime, mired in corruption and subservient to Wall Street interests, the regime that produced misery for so many American workers, lower middle class and older Americans ;-)
Ambassador McFaul soon left the country, NED was banned and screws were tightened enough to make next attempt exceedingly difficult. Although everything can happen I would discount the possibility of the next "White Revolution" in Russia. So called "Putin regime" survived the period of low oil prices and with oil prices over $60 in 2017 Russian economy might be able to grow several percent a year. At the same time the US "post-Obama" regime might well face the winds of returning higher oil prices and their negative influence of economy growth and unemployment.
In China recent troubles in Hong Cong were also a perfect training ground for "anti color revolution" measures and the next attempt would much more difficult, unless China experience economic destabilization due to some bubble burst.
That means that excessive military adventurism inherent in the future Hillary regime might speed up loss by the USA military dominance and re-alignment of some states beyond Philippines. Angela Merkel regime also might not survive the next election and that event might change "pro-Atlantic" balance in Europe.
Although the list in definitely not complete, we can see that there are distinct setbacks for attempts of further neoliberalization beyond Brexit and TPP troubles.
So there are some countervailing forces in action and my impression that the Triumphal march of neoliberalism with the USA as the hegemon of the new neoliberal order is either over, or soon will be over. In certain regions of the globe the USA foreign policy is in trouble (Syria, Ukraine) and while you can do anything using bayonets, you can't sit on them.
So while still there is no viable alternative to neoliberalism as a social system, the ideology itself is discredited and like communism after 1945 lost its hold of hearts and minds of the USA population. I would say that in the USA neoliberalism entered Zombie stage.
My hope is that reasonable voices in foreign policy prevail, and the disgust of unions members toward DemoRats (Neoliberal Democrats) could play the decisive role in coming elections. As bad as Trump is for domestic policy, it represent some hope as for foreign policy unless co-opted by Republican establishment.
Val 10.26.16 at 3:54 am 72
But the problem is that Hillary with her failing health is our of her prime and with a bunch of neocons in key positions in her administration, she really represents a huge threat to world peace. She might not last long as the level of stress inherent in POTUS job make it a killing ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease. But that might kale her more impulsive and more aggressive (and she always tried to outdo her male politicians in jingoism, real John McCain is the red pantsuit).
Does the new CT moderation regime have any expectations about the veracity of claims made by commenters? Because I think it would be useful in cases like this.
Howard Frant 10.26.16 at 6:19 am ( 73 )Stephen @58
Yes, it was late and I was tired, or I wouldn't have said something so foolish. Still, the point is that after centuries of constant war, Europe went 70 years without territorial conquest. That strikes me as a significant achievement, and one whose breach should not be taken lightly.
phenomenal cat @64
So democratic structures have to be robust and transparent before we care about them? I'd give a pretty high value to an independent press and contested elections. Those have been slowly crushed in Russia. The results for transparency have not been great. Personally, I don't believe that Ukraine is governed by fascists, or that Ukraine shot down that jetliner, but I'm sure a lot of Russians do.
Russian leaders have always complained about "encirclement," but we don't have to believe them. Do you really believe Russia's afraid of an attack from Estonia? Clearly what Putin wants is to restore as much of the old Soviet empire as possible. Do you think the independence of the Baltic states would be more secure or less secure if they weren't members of NATO? (Hint: compare to Ukraine, Georgia, Moldova.)
Layman 10.26.16 at 11:33 am ( 79 )'….makes military alliance of Russia and China very likely…'
Any analysis which arrives at this conclusion is profoundly ignorant.
Meta-comment: Is it permitted to say that a moderation scheme which objects to engels as a troll, while permitting this tripe from likbez has taken a wrong turn somewhere. Seriously, some explanation called for.
likbez 10.26.16 at 3:54 pm 80
Does the new CT moderation regime have any expectations about the veracity of claims made by commenters? Because I think it would be useful in cases like this.
I would like to apologize about the number of typos, but I stand by statements made. Your implicit assumption that I am lying was not specific, so let's concentrate on three claims made:
1. "Hillary has serious neurological disease for at least four years",
2. "Obama and Hillary tried to stage color revolution in Russia in 2011-2012 interfering in Russian Presidential elections"
3. "Hillary Clinton is a neocon, a warmonger similar to John McCain"
1. Hillary Health : Whether she suffers from Parkinson disease or not in unclear, but signs of some serious neurological disease are observable since 2012 (for four years). Parkinson is just the most plausible hypothesis based on symptoms observed. Those symptoms suggests that she is at Stage 2 of the disease due to an excellent treatment she gets:
The average time taken to progress from Stage 1 (mild) to Stage 2 (mild but various symptoms) was 1 year 8 months. The average time taken to progress from Stage 2 to Stage 3 (typical) was 7 years and 3 months. From Stage 3 to Stage 4 (severe) took 2 years. From Stage 4 to Stage 5 (incapacitated) took 2 years and 2 months. So the stage with typical symptoms lasts the longest. Those factors associated with faster progression were older age at diagnosis, and longer disease duration. Gender and ethnicity were not associated with the rate of Parkinson's Disease progression.
These figures are only averages. Progression is not inevitable. Some people with Parkinson's Disease have either : stayed the same for decades, reduced their symptoms, rid their symptoms, or worsened at a rapid rate. For more current news go to Parkinson's Disease News.
Concern about Hillary health were voiced in many publications and signs of her neurological disease are undisputable:
2. Hillary and Obama attempt to stage the color revolution in Russia in 2011-2012 are also undisputable, but not widely known:
3. The opinion that Hillary as a neocon is supported by facts from all her career , but especially during her tenure as the Secretary of State. She voted for Iraq war and was instrumental in unleashing Libya war and Syria war. The amount of evidence can't be ignored:
If you have more specific concerns please voice them and I will try to support my statements with references and known facts.
stevenjohnson 10.26.16 at 1:50 pm
likbez @70 Any analysis that starts with the assumption reactionaries still has a great deal to its agenda to achieve, such as promoting regressive taxation; privatization of Social Security; limiting Medicare; privatization of education; expansion of the police state; using the military to support the dollar, banking, world markets, etc., rather than Corey Robin's belief that "the Right" has won is in my view an improvement on the OP. But whether mine is actually a deep analysis seems doubtful even to me.
But the OP is really limiting itself solely to domestic politics, and in that context the resistance to "neoliberal globalization," (Why not use the term "imperialism?") is more or less irrelevant. The OP seems to have some essentialist notion of the "Right" as openly aimed at restoring the past, ignoring the content of policies. Reaction would be something blatant like restoring censorship of TV and movies, instead of IP laws that favor giant telecommunications companies, or abolition of divorce, instead of discriminatory enforcement of child protection laws that break up poor families. This cultural/psychological/moralizing/spiritual approach seems to me to be fundamentally a diversion from a useful understanding.
There may be some sort of confused notions about popular morals and tastes clearly evolving in a more leftish direction. Free love was never a conservative principle for instance, yet many of its tenets are now those of the majority of the population. Personally I can only observe that there's nothing quite like the usefulness of laws and law enforcement, supplemented by the occasional illicit violence, to change social attitudes. The great model of course is the de facto extermination of the Left by "McCarthyism." No doubt the disappearance of the left targeted by "McCarthyism" is perceived to be a purification of the real left. It is customary for the acceptable "left" to agree with the McCarthys that communism lost its appeal to the people, rather than being driven out by mass repression. As to populism, such reactionary goals as the abolition of public education are notoriously sold as service to the people against the hifalutin' snobs, starting of course with lazy ass teachers. It seems to me entirely mistaken to see the populist reactionaries as out of ammunition because the old forms of race-baiting aren't working so well.
By the way, there already is a Chinese bourgeoisie, in Taiwan, Singapore, the Philippines, Malaysia, Indonesia, Hong Kong, as well as elements in SEZs in China proper and select circles in various financial capitals. Restoration of capitalism in China has run into the difficulty that capitalism isn't holding up its end. President Xi Jinping is finding it difficult for capitalism to keep the mainland economy growing at a sufficiently rapid rate to keep the working class pacific, much less generate the so-called middle class whose stock market portfolios will bind them to the new ruling class forever. These are the sources for a revolution in China, not NGOs or a color revolution. In the end, Putin will be done in by his oligarchs, despite the care he has taken to give them their share if they just refrain from wrecking everything with their excesses. Again, no need for NGOs.
Val @72 I remember that there were only rare, vague hints about Reagan, not factual evidence. So unless you are committed to the proposition his Alzheimer's disease only set in January 21, 1992, demanding factual evidence about the mental and physical health of our elective divinities seems unduly restrictive I think.
Layman @79 The Shanghai Cooperation Organization alone makes an analysis that a military alliance between Russia and China reasonable enough. Even if incorrect in the end, it is not "profoundly ignorant."
Meta-comment: Engels post was perceived as mocking, which was its offense. As for "trolling," that's an internet thing...
Oct 24, 2016 | economistsview.typepad.com
Sanjait -> Sandwichman ... October 24, 2016 at 10:35 AMSome paranoid claptrap to go along with your usual anti intellectualism.
Interestingly, with your completely unrelated non sequitur, you've actually illustrated something that does relate to Krugmans post. Namely that there are wingnuts among us. They've taken over the Republican Party, but the left has some too. Fortunately though the Democratic Party hasn't been taken over by them yet, and is still mostly run by grown ups.
Sandwichman -> Sanjait... , October 24, 2016 at 10:42 AMI am confident that what you say here is consistent with your methods and motivations.likbez -> Sandwichman ..."I am confident that what you say here is consistent with your methods and motivations."
Pretty consistent, I agree. IMHO Sanjait might belong to the category that some people call the "Vichy left" – essentially people who are ready to sacrifice all principles to ensure their 'own' prosperity and support the candidate who intends to protect it, everybody else be damned.
Very neoliberal approach if you ask me. Ann Rand would probably be proud for this representative of "creative class".
Essentially the behavior that we've had for the last 8 years with the king of "bait and switch".
Oct 20, 2016 | cepr.net
FastEddie • 5 days ago"The Austerity Tax " was instituted by the GOP as soon as the Brown Guy became president. 8 years earlier, the same GOP pushed a huge Tax cut as Greenspan worried that the surplus was too big. The GOP can always be counted on to put party before country. Good riddance.Paul • 5 days ago50 Million More Jobspieceofcake Paul • 4 days ago
- By 2015, federal spending was 454% higher and the national debt was 20 times greater than when Pres. Reagan took office in 1981. The result: Real GDP gained 153% and jobs increased by more than 50 million from 1981.
- In total, our debt is now 875 times greater than in 1933 at the bottom of the Great Depression. Were we better off then?
- And no, we are not like Greece because we print our money and all our debt is in U.S. dollars. As former Fed chairman Alan Greenspan said: "The U.S. can pay any debt it has because we can always print money to do that. So there is zero probability of default."
- The real limit on printing money and increasing the debt/budget deficit is high inflation which is well controlled by increasing interest rates as the Fed did in 1980 when it cut inflation from 14.6% to 1.6% in 6 years. Interest on the debt is now 1.2% of GDP (national income) and has never exceeded 2% during this century.AND - right - right - the US isn't Greece! -pieceofcake Paul • 4 days ago
If Greece is in danger to go under - there are all these other nice Europeans - who save the Country...
BUT if the almighty US of A is threatening to go under -(like in 2008) - the whole world is in danger to go under with it too... so we desperately need this Greenspan dude - with his wonderful printing machine - and if the American people don't trust him -(because the printing machine seemed to have been not very effective in 2008) - let's tell the people there is always TRUMP - who will put his name in Gold ON IT -
That should do it - Right?Oh ja! -skeptonomist Paul • 4 days ago
Oh ja!! - let's get the Greenspan dude out of retirement to print US... some!!
And especially for the people - who really need the dough - like all these depressed workers -
Let's call up Greenspan and tell him to print RIGHT AWAY - and not waisting any time anymore - or America will be called 'TRUMP' forever!!The Fed and other central banks have been demonstrating that they do not have the ability to print money. Massive QE and record low interest rates have not resulted in the lending by commercial banks which actually expands the money supply. In practice inflation and expansion of the money supply have been brought about in the US and other advanced countries in most cases (excluding the commodity shocks of the 70's) by government spending, especially in wars (or after them as in Germany in 1922). And when the government spends it obviously increases debt.Paul skeptonomist • 3 days ago
It's past time to be relying on the supposed ability of central banks to "print money". The assumptions involved in the monetary "theory" about this are just wrong.The M2 money stock is up 70% over the past 8 years.skeptonomist Paul • 4 days ago
Meanwhile inflation is at a 50 year low and has been falling for the past 5 years.
So you are just dead wrong on the facts. But hey, thanks for your BS theory of economics.If the Fed can control inflation, why did it let inflation increase to 14.6% in the first place? It raised rates continuously from 1977 to 1980 to historic record levels as inflation increased to its peak. As Dean has pointed out before, inflation began to fall rapidly in early 1980 when oil price stabilized, not when the Fed raised rates. The squabbling about the true value of NAIRU is pointless since the Fed has never demonstrated an ability to control inflation.Francisco Flores skeptonomist • 4 days agoInflation increased due to an external shock - the quadrupling of oil and thus food prices. Once they stopped rising, once prices had permeated through the economy, price rises would have tapered off without the horrid recession the Fed imposed on the American people.pieceofcake Francisco Flores • 4 days ago'the horrid recession the Fed imposed on the American people.'Francisco Flores pieceofcake • 4 days ago
You mean the 'US FED'?
Now how was the US FED able to impose some horrid recession on the American people?
By not raising the Interest Rate??? By raising interest rates to 21%?pieceofcake Francisco Flores • 4 days ago'21%?'pieceofcake pieceofcake • 4 days ago
Good Lord - can you imagine how much money we would make just with a savings account?
We wouldn't have to go gambling at all anymore?and seriously - let's raise interest rates 21 percent for everybody who invests her or his money in speculative assets -(like stocks or downtown SF apartments) - and in exchange let's lower the interest rates for every credit card holder down to -1 percent.Francisco Flores pieceofcake • 4 days ago
How does that sound?
-(should be a piece of cake for Dame Yellen!)I'm not following you Piece. But that's OK.pieceofcake Francisco Flores • 4 days ago'I'm not following you Piece.'skeptonomist Paul • 4 days ago
As long as you understand - that it would be really a great idea if the low interest rates would really help 'the people' -(Credit Card holders) - and some high interest rates would help 'the people' too -(all these retirees who would love to get 21 percent from their savings accounts) - that's OK.It is nonsense to claim that shrinking national debt is harmful or that the economy only does well when it is growing. The US debt shrank from its WWII peak in 1947 of 120% of GDP down to 31% in 1975 while the economy was doing very well. There was plenty of spending on things like infrastructure and housing as well as the military. The British debt shrank from over 250% of GDP at the end of the Napoleonic wars down to 30% at the start of WWI - this was the period of British world economic domination.Paul skeptonomist • 4 days ago
The shrinkage of debt/GDP was not brought about by running surpluses, it was because of nominal GDP growth. And that growth was not just inflation - inflation in Britain (and the US) during the 19th century was generally low. Obviously tax rates were highly progressive during and after WW II in the US (and in Britain also, whose debt also shrank).
The lesson is that debts can be controlled with appropriate tax rates (if it is important to do so) and that such rates do not impair growth. There is an enormous amount of foolish economic discourse which deliberately ignores the basic facts about taxes, debt and economic growth."It is nonsense to claim that shrinking national debt is harmful."skeptonomist Paul • 4 days ago
During the 1920s, we had a budget surplus every year and 4 separate recessions during that decade with the last one causing the worst depression in a century.
We had our highest debt-to-GDP ratio after WW II then increased the federal debt 82% and spending 725% over the next quarter century from 1948, producing our greatest prosperity ever: a 168% gain in Real GDP and a 70% increase in jobs.
It is nonsense to ignore the facts that are undeniable.When I refer to "national debt" I mean debt/GDP. There is no need to run surpluses to shrink this, but there is no reason to think that small surpluses are harmful. Spending can be high, as it was in the post-WWII period, without running large deficits, provided tax rates are adequate.Paul skeptonomist • 3 days ago
Surpluses occur - or used to - when the economy is booming and revenues increase and also expenditures for unemployment relief, etc. are low. It is a fact that booms tend to be followed by recessions - they don't go on forever. So the correlation you refer to is an inevitable result of the cyclical nature of economies.So You Are Smarter than Keynes?
The recessions of 1957, 1960, 1970 and 2001 were all immediately preceded by budget surpluses. The Great Depression was preceded by a decade of record budget surpluses and the "Roosevelt Recession" of 1937-38 was caused by FDR's virtual balancing of the federal budget (a deficit of 0.1% of GDP in fiscal year 1938) while the economy was still very weak. whitehouse.gov/omb/budget/hist...
Keynes analyzed this situation and his conclusion was unequivocal: "a change-over from a policy of Government borrowing to the opposite policy of providing sinking funds (for paying off the principal of a debt) is capable of causing a severe contraction of effective demand." The General Theory of Employment, Interes, and Money p. 95.
May 22, 2015 | Antiwar.comThe Russian-Turkish plan to pipe Russian gas through Turkey and then on to Macedonia and thence into southern Europe has long been opposed by the West, which is seeking to block the Russians at every turn. Now the Western powers have found an effective way to stop it: by overthrowing the pro-Russian government of Macedonian Prime Minister Nikola Gruevski.
The original plan was for the pipeline to go through Bulgaria, but Western pressure on the government there nixed that and so the alternative was to pipe the gas through Macedonia and Greece. With the Greeks uninterested in taking dictation from the EU – and relatively impervious, at the moment, to Western-sponsored regime change – the Macedonians were deemed to be the weak link in the pro-Russian chain. That was the cue for the perpetually aggrieved Albanians to play their historic role as the West's willing proxies.
After a long period of dormancy, suddenly the "National Liberation Army" (NLA) of separatist Albanians rose up, commandeering police stations in Kumanovo and a nearby village earlier this month. A 16-hour gun battle ensued, with 8 Macedonian police and 14 terrorists killed in the fighting. The NLA, which reportedly received vital assistance from Western powers during the 2001 insurgency, claimed responsibility for the attacks.
Simultaneously, the opposition Social Democratic Union party (SDSM) – formerly the ruling League of Communists under the Stalinist Tito regime – called for mass demonstrations over a series of recent government scandals. SDSM has lost the last three elections, deemed "fair" by the OCSE, with Gruevski's conservative VMRO-DPMNE (Internal Macedonian Revolutionary Organization – Democratic Party for Macedonian National Unity) enjoying a comfortable majority in parliament. But that doesn't matter to the "pro-democracy" regime-changers: SDSM leader Zoran Zaev declared "This will not be a protest where we gather, express discontent and go home. We will stay until Gruevski quits."
Macedonia has a long history of manipulation at the hands of the NATO powers, who nurtured the Muslim-Kosovar insurgency to impose their will on the components of the former Yugoslavia. As in Kosovo, the Albanians of Macedonia were willing pawns of the West, carrying out terrorist attacks on civilians in pursuit of their goal of a "Greater Albania."
During the 2001 Albanian insurgency, an outgrowth of the Kosovo war, the EU/US used the NLA as a battering ram against the Slavic authorities. The NLA was never an authentic indigenous force, but actually an arm of the US-armed-and-trained "Kosovo Liberation Army," which now rules over the gangster state of Kosovo, crime capital of Europe. A "peace accord," the Ohrid Agreement, was brokered by the West, which kept the NLA essentially intact, albeit formally "dissolved," while the Macedonian government was blackmailed into submission. I wrote about it at the time, here and here.
Follow that last link to read about the George Soros connection. Soros was originally a big booster of Macedonia, handing them a $25 million aid package and holding the country up as a model of multiculturalism. However, the Macedonians soon turned against him when he sided with the Albanians in their demands for government-subsidized Albanian-language universities and ethnic quotas for government jobs. When he told them to change the name of the country to "Slavomakejonija," they told him to take a walk. Soros, a longtime promoter of Albanian separatism – he played sugar daddy to a multitude of front groups that promoted the Kosovo war – is now getting his revenge.
Prime Minister Gruevski, for his part, charges that the sudden uptick in ethnic violence and political turmoil is the work of Western "NGOs" and intelligence agencies (or do I repeat myself?) with the latter playing a key role in releasing recordings of phone conversations incriminating several top government officials. A not-so-implausible scenario, given what happened in neighboring Ukraine.
Speaking of which: the government of President Petro Poroshenko is leading the country into complete financial insolvency and veritable martial law. Aid money from the West is going into the prosecution of the ongoing civil war, and the country has already defaulted on its huge debt in all but the formal sense. Opposition politicians and journalists are routinely murdered and their deaths reported as "suicides," while it is now illegal to describe the ongoing conflict with the eastern provinces as anything but a "Russian invasion." Journalists who contradict the official view are imprisoned: Ruslan Kotsaba, whose arrest I reported on in this space, is still being held, his "trial" a farce that no Western journalist has seen fit to report on. Kotsaba's "crime"? Making a video in which he denounced the war and called on his fellow Ukrainians to resist being conscripted into the military. Antiwar activists throughout the country have been rounded up and imprisoned. Any journalist connected to a Russian media outlet has been arrested.
Yes, these are the "European values" Ukraine is now putting into practice. Adding ignominy to outrage, a law was recently passed – in spite of this Reuters piece urging Poroshenko to veto it – which makes it a crime to criticize the Organization of Ukrainian Nationalists and the Ukrainian Insurgent Army (UPA) that fought on the side of the Germans during World War II. As Ha'aretz reports, a group of 40 historians from major Western academic institutions issued an open letter protesting this outrage:
"Not only would it be a crime to question the legitimacy of an organization (UPA) that slaughtered tens of thousands of Poles in one of the most heinous acts of ethnic cleansing in the history of Ukraine, but also it would exempt from criticism the OUN, one of the most extreme political groups in Western Ukraine between the wars, and one which collaborated with Nazi Germany at the outset of the Soviet invasion in 1941. It also took part in anti-Jewish pogroms in Ukraine and, in the case of the Melnyk faction, remained allied with the occupation regime throughout the war."
Ukraine is showing its true colors, which I identified last year, to the point where even the usually compliant Western media is forced to admit the truth.
Oct 25, 2016 | crookedtimber.org
efcdons 10.24.16 at 4:16 pm 25The right has won or is winning in an some ways on labor and civil rights issues by changing the procedure by which one can assert the rights that may exist.
The number of strikes are down as someone else mentioned. But the Right has also largely succeeded in reducing the ability of individual employees to engage in private actions to vindicate their rights. E.g. the huge increase in enforceable arbitration agreements in what are essentially contracts of adhesion.
The Right has solidified the ability of business to prevent employees from using the independent, publicly funded judiciary, and instead forces them to use private, secretive, arbitrators who essentially work for the companies (because the business is a repeat player and the arbitrators rely on being chosen to arbitrate in order to make their money).
The right has also succeeded in the same way to reduce consumer rights. Arbitration agreements are attached to almost everything you buy that needs an agreement (software, mobile phones, etc.) before use. The agreements not only mandate secret arbitration they also prevent consumers from banding together in order to form a class thus making each individual consumer litigate alone. Obviously this reduces the power of individual consumers and also decreases the incentive for any one consumer to do something about what, on the individual level, may be a small injury. Basically it allows business to steal a small amount from a lot of people.
In regards to Clinton and her chances against any other Republican, here is some polling which suggests the country at least trust the GOP over the Dems on a number of important issues. It is from April, 2016 so not the freshest data. But it might indicate Trump's bog standard GOP policies are not what is driving votes to Clinton/away from Trump.
On the "economy", "taxes", and, "foreign affairs" the respondents "trust" the GOP more than the Dems. Though on one key measure "caring about people like you" the Dems are trusted over the GOP by a slight margin.
bruce wilder 10.24.16 at 5:04 pm
Among the most successful projects of the Right was financialization of the economy.
The reduction of marginal income tax rates on the highest "wage" incomes combined with new doctrines of corporate business leadership that emphasized the maximization of shareholder value created a new class of C-suite business executives occupying positions of great political power as allies and servants of the rentier class of Capital owners. The elaborate structures of financial repression and mutual finance were systematically demolished, removing many of the protections from financial predation afforded the working and middle classes.
In the current election, the Democratic Party has split on financial reform issues, with the dominant faction represented by the Party's candidate prioritizing issues of race and gender equality.
Layman 10.24.16 at 5:06 pm ( 29 )"In regards to Clinton and her chances against any other Republican, here is some polling which suggests the country at least trust the GOP over the Dems on a number of important issues."
I imagine any poll pitting 'generic Republican' against Hillary Clinton in April of this year would have shown 'generic Republican' winning. The problem is, you can't run 'generic Republican'. I'm hard pressed to point at any prominent Republican who I think would be handily beating Clinton now. Once you name them, they have to say what they're for and against, and she takes her shot at them, and they're fighting an uphill battle. And she's the least popular Democratic candidate perhaps ever! That's the only reason it would be close.
A party built around the principles of white male supremacy and dedicated to expanding the wealth and income gap is at a massive disadvantage in any non-gerrymandered election.
kidneystones 10.24.16 at 9:37 pm@21 None, but thanks.
@ 27 You're omission of any reference to rising health care premiums is telling. I take your point regarding 'falling skies' in absolute terms. But the transformation I'm referring to is identified by Corey in the OP intro, and more thoroughly by PDG @32.
When Mark Kleiman is asking people get out the vote to 'save the Republic' rather than build a fairer, juster society something dramatic has changed. On the domestic front, @30 Sebastion H hits the nail squarely on both points: things are bad and nobody is paying attention. Neither phenomena is new. The NYT had a headline in 2011 or so entitled "the Invisible unemployed." How did we miss it?
Scott P. may be right that the numbers of officially unemployed may be dropping slightly, and that wages are rising this quarter. Let's say that both trends are spot on. We've all seen ( I hope) the data regarding income inequality white households versus all others.
On the one hand I think Scott P. is completely correct. The donor class candidate always wins; drugs, video games and pornography will occupy and distract the young most affected; the 'left' will become the Vichy left – essentially sacrificing all principle to ensure their 'own' candidate is protected – essentially what we've had for the last 8 years. The left will pat itself on the back and engage in virtue signalling while Ted Cruz burns books and crosses, and increasing numbers of the forgotten and ignored lose what little faith remains.
Anarcissie 10.25.16 at 4:06 am J-D 10.25.16 at 2:05 am@ 42
A ruling class is not always able to bring about the visions of its ideology. However, I think in the last 30 years (or more) in the United States the ruling class desired more power, wealth, and inequality - the rightist vision - and was able to bring it about through control of both major political parties.
Jan 27, 2016 | larspsyll.wordpress.com
Paul Krugman's recent posts have been most peculiar. Several have looked uncomfortably like special pleading for political figures he likes, notably Hillary Clinton. He has, in my judgement, stooped rather far down in attacking people well below him in the public relations food chain …
Perhaps the most egregious and clearest cut case is his refusal to address the substance of a completely legitimate, well-documented article by David Dayen outing Krugman, and to a lesser degree, his fellow traveler Mike Konczal, in abjectly misrepresenting Sanders' financial reform proposals …
The Krugman that was early to stand up to the Iraq War, who was incisive before and during the crisis has been very much in absence since Obama took office. It's hard to understand the loss of intellectual independence. That may not make Krugman any worse than other Democratic party apparatchiks, but he continues to believe he is other than that, and the lashing out at Dayen looks like a wounded denial of his current role. Krugman and Konczal need to be seen as what they are: part of the Vichy Left brand cover for the Democratic party messaging apparatus. Krugman, sadly, has chosen to diminish himself for a not very worthy cause.
Yves Smith/Naked Capitalism
Oct 25, 2016 | economistsview.typepad.com
anne : October 25, 2016 at 05:09 AMhttp://cepr.net/blogs/beat-the-press/the-problem-with-the-problem-with-men
October 24, 2016
The Problem with the Problem with Men
We continue to see a steady drumbeat of news stories and opinion pieces about the problem of men, and especially less-educated men, in the modern economy. The pieces always start with the fact that large numbers of prime-age men (ages 25–54) have dropped out of the labor force. The latest entry is a New York Times column * by Susan Chira that highlighted recent research showing that a large percentage of men who are not in the labor force are in poor health and frequent users of pain medication.
... ... ...
Undoubtedly many are, although the extent to which these problems are the result of their unemployment or a cause will often not be clear. Nonetheless, steps that can improve public health will be a good thing, but the better place to look to solve the problem of unemployment is Washington.
-- Dean BakerReply Tuesday, anne -> anne... , October 25, 2016 at 05:10 AMhttp://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economyJohnH -> anne... , -1
September 14, 2016
Men Who Don't Work: When Did Economists Stop Being Wrong About the Economy?
By Cherrie Bucknor and Dean Baker
... ... ...
Since there is a drop in prime-age EPOPs for all groups, this would seem to suggest that the main problem is a lack of demand and not some new difficulty that some relatively narrow group of workers has in dealing with the labor market. Before going through these trends, it is worth making an additional point; this decline in EPOPs was not expected before it happened.
For example, the Congressional Budget Office (CBO) in 2001 projected that EPOPs would continue to rise from their 2000 peaks. It projected that the potential labor force would grow at an average annual rate of 1.1 percent over the next decade, implying that it would be 11.6 percent larger in 2010 than in 2000. This growth was driven in part by population growth, but also by the expectation that the trend of rising EPOPs for women would continue.
In fact, the labor force in 2010 was just 7.9 percent larger than in 2000. This 3.7 percentage point difference corresponds to a labor force that was 5 million smaller in 2010 than CBO had projected for that year in 2001. (It is worth noting that the CBO projections were not an outlier. CBO tries to ensure that its projections lie close to the middle of the pack for economic forecasters.)
If the argument that structural factors have led to a permanent lowering of prime-age EPOPs is right, as opposed to just weakness in demand reducing employment, then the 2001 projections for the growth of the potential labor force were clearly wrong. Of course official projections have often proven wrong, but this should give us caution about our ability to accurately assess the structural determinants of employment rates. After all, it's not obvious that our knowledge of the economy is very much better in 2016 than it was in 2001.
The figure below shows the employment to population ratios for prime-age workers by gender and education levels.
The ratios for 2000 are set at 100 to allow for a clear view of the drop off from this peak. As noted, all groups see some drop from this peak, with the smallest drop for college-educated women, followed by college-educated men. The drop for prime-age workers with some college is considerably sharper, with the drop for women being somewhat larger than the drop for men. The drop for workers with a high school degree or less is even greater, but here also the drop is larger for women than for men. The decline in EPOPs for prime-age men with a high school degree or less is 7.8 percent, while the drop for women is 14.0 percent. Given the much sharper drop in EPOPs for less-educated women, it is difficult to understand why the policy debate has focused on men leaving the labor force.
The more fundamental issue is that it is difficult to explain a drop in EPOPS for all workers, regardless of education levels, as being a problem of workers lacking skills or a desire to work. This looks pretty clearly like a story of weak demand. In other words, the problem is not them; it is us, where "us" is the people who make economic policy.
 This discussion focuses on EPOPs rather than labor force participation rates (LFPR) because the latter has likely been affected by the tightening of rules for getting unemployment insurance. It is widely recognized that many unemployed workers drop out of the labor force when they are no longer eligible for unemployment benefits. With many states having instituted stricter rules on benefits over this period, we would have expected a decline in LFPR even with no changes in the workforce or the economy.Economist should also be looking at labor participation rates in other industrial growth which are experiencing the same economic stagnation as the US. In the UK and Japan EPOPs are near record highs, while US rates are near 40 year lows. Why such a disparity?
My hunch is that economists are trying to find ways to explain away the low EPOP rates in the US, because the crux of the problem goes back to investor friendly/worker hostile policies that they have advocated for years--trade policy and trickle down monetary policy.
Oct 25, 2016 | economistsview.typepad.com
RC AKA Darryl, Ron : October 25, 2016 at 04:56 AM RE: Mergers Raise Prices, Not Efficiency
[IMO, Noah muddles the message, but it is a important topic that gets muddled by everyone else too. Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century.
Efficiency itself is an amorphous term. Mergers can be an efficient use of capital since they deliver lower competition and higher profits. JP Morgan did not want to be in a industry that he could not dominate. Efficiency is different for a fish than a capital owner. Mergers are good for regulatory capture and ineffishient for fish. Mergers are inefficient for workers that want higher wages or the unemployed that want jobs. Market power and regulatory capture can be efficient vehicles for taking advantage of trade agreements to offshore production and increase returns to capital all while lowering both prices and quality as well as reducing domestic wages. Efficiency is in the eyeballs of the beholder especially if they make good soup.] Reply Tuesday, reason -> RC AKA Darryl, Ron... , October 25, 2016 at 06:58 AMBut Keynes was saying something quite different - he wasn't actually talking about policy but about economics (the task of economists). He was saying that understanding short term fluctuations was as important as predicting the long term. Still relevant in this age of irrelevant general equilibrium models.RC AKA Darryl, Ron -> reason ... , October 25, 2016 at 09:56 AMSorry, I thought that the whole purpose of the study of macroeconomics was to guide policy decisions. I stand corrected.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:02 AMI always looked at Keynes as a fellow traveler, one who wrote obtusely at times for the express purpose of couching his meaning in sweetened platitudes that at a second glance were drenched in cynicism and sarcasm, at least when it came to his opinions of economists and politicians and the capital owning class that they both served.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:39 AMOK, "obtusely" was a poor choice of words, at least with regards to Keynes. Keynes realized WWI was a big mistake, the Treaty at Versailles was an abomination with regards to German restitution, and he was accused of anti-Semitism just for being honest about Jewish elites in the Weimar Republic. It was not that Keynes was insensitive, unpatriotic, or anti-Semitic, but that Keynes was just correct on all counts.JohnH -> RC AKA Darryl, Ron... , -1This is a good example of economists working in lock step with investors: "Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century."point -> RC AKA Darryl, Ron... , October 25, 2016 at 10:26 AM
I think it has been questioned for decades whether increased efficiency in banking actually materialized in the wake of industry consolidation. Local market oligopolies may well have generated higher profits and the appearance of more efficiency. And concentration certainly facilitated collusion as we have seen in many markets, including LIBOR.
What concentration indisputably caused was a dramatic increase in the political power of the Wall Street banking cartel, which owns not only the Federal Reserve but also a lot of powerful politicians...a subject on which 'liberal' economists are generally agnostic, since politics is outside their silo.The article ignored the effect of mergers on supplier relationships, often one of near monopsony (oligopsony?). DOJ seems to be focused on unit pricing to consumers(though perhaps not with cable) to the point that most managements understand that they have free rein to squeeze suppliers. And so they merge to do so.RC AKA Darryl, Ron -> point... , October 25, 2016 at 10:41 AM
It may be that more contribution to increasing margins is from purchase prices than selling prices.Doubly so with global supply chaining.
Oct 25, 2016 | www.nakedcapitalism.comPosted on October 25, 2016 by Yves Smith This is Naked Capitalism fundraising week. 1325 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in financial realm. Please join us and participate via our Tip Jar , which shows how to give via check, credit card, debit card, or PayPal. Read about why we're doing this fundraiser, what we've accomplished in the last year, and our fifth goal, more original reporting .
Yves here. We are delighted to feature an excerpt from Dean Baker's new book Rigged , which you can find at http://deanbaker.net/books/rigged.htm via either a free download or in hard copy for the cost of printing and shipping. The book argues that policy in five areas, macroeconomics, the financial sector, intellectual property, corporate governance, and protection for highly paid professionals, have all led to the upward distribution of income. The implication is that the yawning gap between the 0.1% and the 1% versus everyone else is not the result of virtue ("meritocracy") but preferential treatment, and inequality would be substantially reduced if these policies were reversed.
I urge you to read his book in full and encourage your friends, colleagues, and family to do so as well.
By Dean Baker, Co-Director, Center for Economic and Policy Research
Chapter 1: Introduction: Trading in myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016).  After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt.
In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem.  Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment.  Economies adjust so that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return (Figure 1-1).
So the United States, Japan, and the European Union should be running large trade surpluses, which is what an outflow of capital means. Rich countries like ours should be lending money to developing countries, providing them with the means to build up their capital stock and infrastructure while they use their own resources to meet their people's basic needs.
This wasn't just theory. That story accurately described much of the developing world, especially Asia, through the 1990s. Countries like Indonesia and Malaysia were experiencing rapid annual growth of 7.8 percent and 9.6 percent, respectively, even as they ran large trade deficits, just over 2 percent of GDP each year in Indonesia and almost 5 percent in Malaysia.
These trade deficits probably were excessive, and a crisis of confidence hit East Asia and much of the developing world in the summer of 1997. The inflow of capital from rich countries slowed or reversed, making it impossible for the developing countries to sustain the fixed exchange rates most had at the time. One after another, they were forced to abandon their fixed exchange rates and turn to the International Monetary Fund (IMF) for help.
Rather than promulgating policies that would allow developing countries to continue the textbook development path of growth driven by importing capital and running trade deficits, the IMF made debt repayment a top priority. The bailout, under the direction of the Clinton administration Treasury Department, required developing countries to switch to large trade surpluses (Radelet and Sachs 2000, O'Neil 1999).
The countries of East Asia would be far richer today had they been allowed to continue on the growth path of the early and mid-1990s, when they had large trade deficits (Figure 1-2). Four of the five would be more than twice as rich, and the fifth, Vietnam, would be almost 50 percent richer. South Korea and Malaysia would have higher per capita incomes today than the United States.
In the wake of the East Asia bailout, countries throughout the developing world decided they had to build up reserves of foreign exchange, primarily dollars, in order to avoid ever facing the same harsh bailout terms as the countries of East Asia. Building up reserves meant running large trade surpluses, and it is no coincidence that the U.S. trade deficit has exploded, rising from just over 1 percent of GDP in 1996 to almost 6 percent in 2005. The rise has coincided with the loss of more than 3 million manufacturing jobs, roughly 20 percent of employment in the sector.
There was no reason the textbook growth pattern of the 1990s could not have continued. It wasn't the laws of economics that forced developing countries to take a different path, it was the failed bailout and the international financial system. It would seem that the enemy of the world's poor is not Bernie Sanders but rather the engineers of our current globalization policies.
There is a further point in this story that is generally missed: it is not only the volume of trade flows that is determined by policy, but also the content. A major push in recent trade deals has been to require stronger and longer patent and copyright protection. Paying the fees imposed by these terms, especially for prescription drugs, is a huge burden on the developing world. Bill Clinton would have much less need to fly around the world for the Clinton Foundation had he not inserted the TRIPS (Trade Related Aspects of Intellectual Property Rights ) provisions in the World Trade Organization (WTO) that require developing countries to adopt U.S.-style patent protections. Generic drugs are almost always cheap -patent protection makes drugs expensive. The cancer and hepatitis drugs that sell for tens or hundreds of thousands of dollars a year would sell for a few hundred dollars in a free market. Cheap drugs would be more widely available had the developed world not forced TRIPS on the developing world.
Of course, we have to pay for the research to develop new drugs or any innovation. We also have to compensate creative workers who produce music, movies, and books. But there are efficient alternatives to patents and copyrights, and the efforts by the elites in the United States and other wealthy countries to impose these relics on the developing world is just a mechanism for redistributing income from the world's poor to Pfizer, Microsoft, and Disney. Stronger and longer patent and copyright protection is not a necessary feature of a 21 st century economy.
In textbook trade theory, if a country has a larger trade surplus on payments for royalties and patent licensing fees, it will have a larger trade deficit in manufactured goods and other areas. The reason is that, in theory, the trade balance is fixed by national savings and investment, not by the ability of a country to export in a particular area. If the trade deficit is effectively fixed by these macroeconomic factors, then more exports in one area mean fewer exports in other areas. Put another way, income gains for Pfizer and Disney translate into lost jobs for workers in the steel and auto industries.
The conventional story is that we lose manufacturing jobs to developing countries because they have hundreds of millions of people willing to do factory work at a fraction of the pay of manufacturing workers in the United States. This is true, but developing countries also have tens of millions of smart and ambitious people willing to work as doctors and lawyers in the United States at a fraction of the pay of the ones we have now.
Gains from trade work the same with doctors and lawyers as they do with textiles and steel. Our consumers would save hundreds of billions a year if we could hire professionals from developing countries and pay them salaries that are substantially less than what we pay our professionals now. The reason we import manufactured goods and not doctors is that we have designed the rules of trade that way. We deliberately write trade pacts to make it as easy as possible for U.S. companies to set up manufacturing operations abroad and ship the products back to the United States, but we have done little or nothing to remove the obstacles that professionals from other countries face in trying to work in the United States. The reason is simple: doctors and lawyers have more political power than autoworkers. 
In short, there is no truth to the story that the job loss and wage stagnation faced by manufacturing workers in the United States and other wealthy countries was a necessary price for reducing poverty in the developing world.  This is a fiction that is used to justify the upward redistribution of income in rich countries. After all, it is pretty selfish for rich country autoworkers and textile workers to begrudge hungry people in Africa and Asia and the means to secure food, clothing, and shelter.
The other aspect of this story that deserves mention is the nature of the jobs to which our supposedly selfish workers feel entitled. The manufacturing jobs that are being lost to the developing world pay in the range of $15 to $30 an hour, with the vast majority closer to the bottom figure than the top. The average hourly wage for production and nonsupervisory workers in manufacturing in 2015 was just under $20 an hour, or about $40,000 a year. While a person earning $40,000 is doing much better than a subsistence farmer in Sub-Saharan Africa, it is difficult to see this worker as especially privileged.
By contrast, many of the people remarking on the narrow-mindedness and sense of entitlement of manufacturing workers earn comfortable six-figure salaries. Senior writers and editors at network news shows or at the New York Times and Washington Post feel entitled to their pay because they feel they have the education and skills to be successful in a rapidly changing global economy.
These are the sort of people who consider it a sacrifice to work at a high-level government job for $150,000 to $200,000 a year. For example, Timothy Geithner, President Obama's first treasury secretary, often boasts about his choice to work for various government agencies rather than earn big bucks in the private sector. His sacrifice included a stint as president of the Federal Reserve Bank of New York that paid $415,000 a year.  This level of pay put Geithner well into the top 1 percent of wage earners.
Geithner's comments about his sacrifices in public service did not elicit any outcry from the media at the time because his perspective was widely shared. The implicit assumption is that the sort of person who is working at a high level government job could easily be earning a paycheck that is many times higher if they were employed elsewhere. In fact, this is often true. When he left his job as Treasury Secretary, Geithner took a position with a private equity company where his salary is likely several million dollars a year.
Not everyone who was complaining about entitled manufacturing workers was earning as much as Timothy Geithner, but it is a safe bet that the average critic was earning far more than the average manufacturing worker - and certainly far more than the average displaced manufacturing worker.
Turning the Debate Right-Side Up: Markets Are Structured
The perverse nature of the debate over a trade policy that would have the audacity to benefit workers in rich countries is a great example of how we accept as givens not just markets themselves but also the policies that structure markets. If we accept it as a fact of nature that poor countries cannot borrow from rich countries to finance their development, and that they can only export manufactured goods, then their growth will depend on displacing manufacturing workers in the United States and other rich countries.
It is absurd to narrow the policy choices in this way, yet the centrists and conservatives who support the upward redistribution of the last four decades have been extremely successful in doing just that, and progressives have largely let them set the terms of the debate.
Markets are never just given. Neither God nor nature hands us a worked-out set of rules determining the way property relations are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices. The elites have written these rules to redistribute income upward. Needless to say, they are not eager to have the rules rewritten which means they have no interest in even having them discussed.
But for progressive change to succeed, these rules must be addressed. While modest tweaks to tax and transfer policies can ameliorate the harm done by a regressive market structure, their effect will be limited. The complaint of conservatives - that tampering with market outcomes leads to inefficiencies and unintended outcomes - is largely correct, even if they may exaggerate the size of the distortions from policy interventions. Rather than tinker with badly designed rules, it is far more important to rewrite the rules so that markets lead to progressive and productive outcomes in which the benefits of economic growth and improving technology are broadly shared
This book examines five broad areas where the rules now in place tend to redistribute income upward and where alternative rules can lead to more equitable outcomes and a more efficient market:
Macroeconomic policies determining levels of employment and output. Financial regulation and the structure of financial markets. Patent and copyright monopolies and alternative mechanisms for financing innovation and creative work. Pay of chief executive officers (CEOs) and corporate governance structures. Protections for highly paid professionals, such as doctors and lawyers.
In each of these areas, it is possible to identify policy choices that have engineered the upward redistribution of the last four decades.
In the case of macroeconomic policy, the United States and other wealthy countries have explicitly adopted policies that focus on maintaining low rates of inflation. Central banks are quick to raise interest rates at the first sign of rising inflation and sometimes even before. Higher interest rates slow inflation by reducing demand, thereby reducing job growth, and reduced job growth weakens workers' bargaining power and puts downward pressure on wages. In other words, the commitment to an anti-inflation policy is a commitment by the government, acting through central banks, to keep wages down. It should not be surprising that this policy has the effect of redistributing income upward.
The changing structure of financial regulation and financial markets has also been an important factor in redistributing income upward. This is a case where an industry has undergone very rapid change as a result of technological innovation. Information technology has hugely reduced the cost of financial transactions and allowed for the development of an array of derivative instruments that would have been unimaginable four decades ago. Rather than modernizing regulation to ensure that these technologies allow the financial sector to better serve the productive economy, the United States and other countries have largely structured regulations to allow a tiny group of bankers and hedge fund and private equity fund managers to become incredibly rich.
This changed structure of regulation over the last four decades was not "deregulation," as is often claimed. Almost no proponent of deregulation argued against the bailouts that saved Wall Street in the financial crisis or against the elimination of government deposit insurance that is an essential part of a stable banking system. Rather, they advocated a system in which the rules restricting their ability to profit were eliminated, while the insurance provided by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and other arms of the government were left in place. The position of "deregulators" effectively amounted to arguing that they should not have to pay for the insurance they were receiving.
The third area in which the rules have been written to ensure an upward redistribution is patent and copyright protection. Over the last four decades these protections have been made stronger and longer. In the case of both patent and copyright, the duration of the monopoly period has been extended. In addition, these monopolies have been applied to new areas. Patents can now be applied to life forms, business methods, and software. Copyrights have been extended to cover digitally produced material as well as the internet. Penalties for infringement have been increased and the United States has vigorously pursued their application in other countries through trade agreements and diplomatic pressure.
Government-granted monopolies are not facts of nature, and there are alternative mechanisms for financing innovation and creative work. Direct government funding, as opposed to government granted monopolies, is one obvious alternative. For example, the government spends more than $30 billion a year on biomedical research through the National Institutes of Health - money that all parties agree is very well spent. There are also other possible mechanisms. It is likely that these alternatives are more efficient than the current patent and copyright system, in large part because they would be more market-oriented. And, they would likely lead to less upward redistribution than the current system.
The CEOs who are paid tens of millions a year would like the public to think that the market is simply compensating them for their extraordinary skills. A more realistic story is that a broken corporate governance process gives corporate boards of directors - the people who largely determine CEO pay -little incentive to hold down pay. Directors are more closely tied to top management than to the shareholders they are supposed to represent, and their positions are lucrative, usually paying six figures for very part-time work. Directors are almost never voted out by shareholders for their lack of attention to the job or for incompetence.
The market discipline that holds down the pay of ordinary workers does not apply to CEOs, since their friends determine their pay. And a director has little incentive to pick a fight with fellow directors or top management by asking a simple question like, "Can we get a CEO just as good for half the pay?" This privilege matters not just for CEOs; it has the spillover effect of raising the pay of other top managers in the corporate sector and putting upward pressure on the salaries of top management in universities, hospitals, private charities, and other nonprofits.
Reformed corporate governance structures could empower shareholders to contain the pay of their top-level employees. Suppose directors could count on boosts in their own pay if they cut the pay of top management without hurting profitability, With this sort of policy change, CEOs and top management might start to experience some of the downward wage pressure that existing policies have made routine for typical workers.
This is very much not a story of the natural workings of the market. Corporations are a legal entity created by the government, which also sets the rules of corporate governance. Current law includes a lengthy set of restrictions on corporate governance practices. It is easy to envision rules which would make it less likely that CEOs earn such outlandish paychecks by making it easier for shareholders to curb excessive pay.
Finally, government policies strongly promote the upward redistribution of income for highly paid professionals by protecting them from competition. To protect physicians and specialists, we restrict the ability of nurse practitioners or physician assistants to perform tasks for which they are entirely competent. We require lawyers for work that paralegals are capable of completing. While trade agreements go far to remove any obstacle that might protect an autoworker in the United States from competition with a low-paid factory worker in Mexico or China, they do little or nothing to reduce the barriers that protect doctors, dentists, and lawyers from the same sort of competition. To practice medicine in the United States, it is still necessary to complete a residency program here, as though there were no other way for a person to become a competent doctor.
We also have done little to foster medical travel. This could lead to enormous benefits to patients and the economy, since many high cost medical procedures can be performed at a fifth or even one-tenth the U.S. price in top quality medical facilities elsewhere in the world. In this context, it is not surprising that the median pay of physicians is over $250,000 a year and some areas of specialization earn close to twice this amount. In the case of physicians alone, if pay were reduced to West European-levels the savings would be close to $100 billion a year (@ 0.6 percent of GDP).
Changing the rules in these five areas could reduce much and possibly all of the upward redistribution of the last four decades. But changing the rules does not mean using government intervention to curb the market. It means restructuring the market to produce different outcomes. The purpose of this book is to show how.
 See also Weissman (2016), Iacono (2016), Worstall (2016), Lane (2016), and Zakaria (2016).
 As explained in the next chapter, this view is not exactly correct, but it's what you're supposed to believe if you adhere to the mainstream economic view.
 There can be modest changes in employment through a supply-side effect. If the trade deal increases the efficiency of the economy, then the marginal product of labor should rise, leading to a higher real wage, which in turn should induce some people to choose work over leisure. So the trade deal results in more people choosing to work, not an increased demand for labor.
 For those worried about brain drain from developing countries, there is an easy fix. Economists like to talk about taxing the winners, in this case developing country professionals and rich country consumers, to compensate the losers, which would be the home countries of the migrating professionals. We could tax a portion of the professionals' pay to allow their home countries to train two or three professionals for every one that came to the United States. This is a classic win-win from trade.
 The loss of manufacturing jobs also reduced the wages of less-educated workers (those without college degrees) more generally. The displaced manufacturing workers crowded into retail and other service sectors, putting downward pressure on wages there.
 As a technical matter, the Federal Reserve Bank of New York is a private bank. It is owned by the banks that are members of the Federal Reserve System in the New York District.0 0 0 0 2 6
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Peter K. -> Sanjait... , October 24, 2016 at 11:48 AM"That's not untrue, but it seems to me to be getting worse."likbez -> DrDick... , -1
Because of economic stagnation and anxiety among lower class Republicans. Trump blames immigration and trade unlike traditional elite Republicans. These are economic issues.
Trump supporters no longer believe or trust the Republican elite who they see as corrupt which is partly true. They've been backing Nixon, Reagan, Bush etc and things are just getting worse. They've been played.
Granted it's complicated and partly they see their side as losing and so are doubling down on the conservatism, racism, sexism etc. But Trump *brags* that he was against the Iraq war. That's not an elite Republican opinion.My impression is that Trumpism is more about dissatisfaction of the Republican base with the Republican brass (which fully endorsed neoliberal globalization), the phenomenon somewhat similar to Sanders.likbez : , October 24, 2016 at 12:00 PM
Working class and lower middle class essentially abandoned DemoRats (Clinton democrats) after so many years of betrayal and "they have nowhere to go" attitude.
Looks like they have found were to go this election cycle and this loss of the base is probably was the biggest surprise for neoliberal Democrats.
Now they try to forge the alliance of highly paid professionals who benefitted from globalization("creative class"), financial speculators and minorities. Which does not look like a stable coalition to me.
Some data suggest that among unions which endorsed Hillary 3 out of 4 members will vote against her. And that are data from union brass. Lower middle class might also demonstrate the same pattern this election cycle.
In other words both Parties are now split and have two mini-parties inside. I am not sure that Sanders part of Democratic party would support Hillary. The wounds caused by DNC betrayal and double dealing are still too fresh.
We have something like what Marxists call "revolutionary situation" when the elite loses control of "peons". And existence of Internet made MSM propaganda far less effective that it would be otherwise. That's why they resort to war propaganda tricks.My impression is that that key issue is as following: a vote for Hillary is a vote for the War Party and is incompatible with democratic principles.
She is way too militant, and is not that different in this respect from Senator McCain. That creates a real danger of unleashing the war with Russia.
Trump with all his warts gives us a chance to get some kind of détente with Russia.
In other words no real Democrat can vote for Hillary.
Oct 24, 2016 | cepr.netAt the debate last night, moderator Chris Wallace challenged both candidates on the question of cutting Social Security and Medicare. The implication is that the country is threatened by the prospect of out of control government deficits. The question was misguided on several grounds.
First, as a matter of law the Social Security program can only spend money that is in the trust fund. This means that, unless Congress changes the law, the program can never be a cause of runaway deficits.
Second, it is important to note that the size of the projected shortfall in the Medicare Part A program (the portion funded by its own tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but some of the slowdown is undoubtedly attributable to the impact of the ACA.
Anyhow, the implication of Wallace's question, that these programs are somehow out of control and require some near term fix, is not supported by the data. We will have to make changes to maintain full funding for Social Security, but there is no urgency to this issue.
On the more general point of deficits, the country's problem since the crash in 2008 has been deficits that are too small, not too large. The main factor holding back the economy has been a lack of demand, not a lack of supply. Deficits create more demand, either directly through government spending or indirectly through increased consumption. If we had larger deficits in recent years we would have seen more GDP, more jobs, and, due to a tighter labor market, higher wages.
The problem of too small deficits is not just a short-term issue. A smaller economy means less investment in new plant and equipment and research. This reduces the economy's capacity in the future. In the same vein, high rates of unemployment cause people to permanently drop out of the labor force, reducing our future labor supply if these people become unemployable. (Having unemployed parents is also very bad news for the kids who will have worse life prospects.)
The Congressional Budget Office now puts potential GDP at about 10 percent lower for 2016 than its projection from 2008, before the recession. Much of this drop is due the decision to run smaller deficits and prevent the economy from reaching its potential level of output. We can think of this loss of potential output as a "austerity tax." It currently is at close to $2 trillion a year or more than $6,000 for every person in the country.
It is unfortunate that Wallace chose to devote valuable debate time to a non-problem while ignoring the huge problem of needless unemployment and lost output due to government deficits that are too small.WDG • 4 days agoOn Chris Wallace's question, we know now from Hillary Clinton's Wall Street speeches that her plan on debt and entitlements is to support the elitist Bowles-Simpson project, the centerpiece of which was raising the age for Medicare and Social Security. Who do you think Hillary is lying to about benefits - everyday Americans like you (who she deplores) or her Wall Street backers?
pieceofcake • 4 days agoand the nerve of this Wallace dude and the nerve of all these other... so called journalist on this show?NN • 4 days ago
Wallace even didn't notice - the whole time!! - that it was Alec Baldwin -(and not Trump) - who answered his silly questions - and then the nerve of the so called 'media' to praise Wallace - that he didn't notice that Alec Baldwin answered his questions.
... ... ...I am perfectly fine with running deficits to get out of a recession and compensate for temporary shortfall in private demand. Isn't this the original idea behind deficit spending? But we are 7 years out of a recession.Paul NN • 4 days ago
Japan has been doing this deficit spending thing for 20+ years and borrowed an enormous amount of money. It has not solved anything. Growth continues to be elusive. Progressive economists keep whistling by the graveyard. And the conservatives just want to cut taxes. Both groups look like medieval doctors who prescribe bloodletting no matter what the illness is. Oh, the dismal science!The Japanese yen is severely overvalued and therefore Japan's exports no longer can sustain GDP growth as they did in the past. Combined with Japan's anemic consumer demand, there is nothing but government spending to spur growth. If Japan now cut its deficit spending, its economy would collapse.michael garneau carolindenver • 2 days agoMy point is that American health care is profit driven. The private health insurer companies drive up the costs in all sectors of health care - whether that be for a simple phlebotomy test or a urinary catheter or...., or for a visit to a cardiologist after initial treatment for angina in an emergency dep't.carolindenver michael garneau • a day ago
Health care should be considered a basic human right in any country and not one that is affected by the amount a person can pay - or the quality of private insurance a person can afford. I worked in the field for 33 years before retiring and what I saw was, in many cases, very sad and unfortunate. Those who had money went on with their lives and those who did not often simply died. That is no way to manage any society.Dear Michael,I am in TOTALl agreement with you but, as a very satisfied Kaiser Permanente member, I am a little defensive about maligning the term "HMO" which, I believe, is a beacon of hope for "Best Practices" in our current profit driven health delivery mess. I am a retired RN who watched first hand as the system became ruled by consolidation and greed. I remember in the 1980s being told that consolidation would bring cost down. What a joke that was. So I am working for single payer, Medicare for all. Carolstewarjt • 4 days ago"It is unfortunate that Wallace chose to devote valuable debate time to aJaaaaaCeeeee stewarjt • 4 days ago
non-problem while ignoring the huge problem of needless unemployment
and lost output due to government deficits that are too small." -D. Baker
That's Wallace's job and he does it expertly.Well, not so much expertly as doggedly, with enthusiasm, and without letting anything like arithmetic or reality interfere.Francisco Flores • 4 days agoWe should have a Full Employment Fiscal Policy coupled with a Federal Job Guaranty would put an end to this discussion. Funding the entitlements are not an issue - although the law may need to be revised - as the government can issue its currency without a problem - inflation being the constraint. (The increase in demand for apartments, cable subscriptions, and shuffleboards are unlikely to trigger uncontrolled inflation.)AlanInAZ • 4 days agoDean thinks the debt is not a problem but the majority of voters Clinton was trying to reach probably do think it is a problem. She proudly proclaimed that her programs would not add to the national debt implying no increase in deficit spending. She ridiculed Trump because his tax plan would add significantly to the deficit and national debt. Clearly she wants to portray an image of fiscal responsibility and Wallace's question allowed her to go down that path.AlanInAZ NP • 4 days agoI did not say that she did not propose to increase spending - just that she would not increase the debt because everything is "paid for". If everything is paid for by tax increases then there is no near term stimulus to the overall economy. There may be long term benefits if the projects are worthwhile but that will take years to surface. She also declined to defend the benefits of fiscal stimulus after the financial crisis. People hear what they want to hear from these debates.NP AlanInAZ • 4 days agoI think you are wrong about the near term benefits of taxing wealthy people and then using that money for public spending. The propensity of the wealthy for spending is low and therefore if you take some of their money and spend it it will be stimulative.AlanInAZ NP • 3 days agoI am aware of this ptc argument but find it weak. I know plenty of "wealthy" couples who save very little. Anyhow, even if there is some merit to the argument why not borrow now at almost zero cost and ensure the maximum stimulus.Francisco Flores AlanInAZ • 3 days ago
Another factor - public spending may not find its way into the lowest income levels of our society. Infrastructure projects, for example, will enrich contractors and materials industries as much or more than the individual workers. Also, they take a long time to get started as there really is no such thing as shovel ready. Couple the protracted startup with higher taxes and you get very little near term benefit.This whole discussion is of course mute since running deficits does not crowd out investing. And increasing the debt has no negative implication other then the political effects. The government can print money and spend money. If it runs deficits it can keep interest rates low by buying securities.jumpinjezebel • 4 days agoWe need to stimulate DEMAND Now to get the economy revved up and the money flowing. Best way is the change Social Security such that it doesn't kick in until the earner has made $10,000 (i.e.) and account for that by lifting the cap accordingly such that 90% of all earned income is taxed: just as it used to be when Reagan/?? fixed it. Just think what all that money would do in the economy. It would not be used to by back stock or inflate golden parachutes. It would be immediately spent. It would be DEMAND.
Oct 24, 2016 | economistsview.typepad.com
anne : October 23, 2016 at 02:04 PM , 2016 at 02:04 PMhttp://cepr.net/blogs/beat-the-press/the-173-trillion-austerity-tax-in-the-infinite-horizon
October 23, 2016
The $173 Trillion Austerity Tax in the Infinite Horizon
By Lara Merling and Dean Baker
The Peter Peterson-Washington Post deficit hawk gang keep trying * to scare us into cutting Social Security and Medicare. If we don't cut these programs now, then at some point in the future we might have to cut these program or RAISE TAXES.
There are many good reasons not to take the advice of the deficit hawks, but the most immediate one is that our economy is suffering from a deficit that is too small, not too large. The point is straightforward, the economy needs more demand, which we could get from larger budget deficits. More demand would lead to more output and employment. It would also cause firms to invest more, which would make us richer in the future.
The flip side in this story is that because we have not been investing as much as we would in a fully employed economy, our potential level of output is lower today than if we had remained near full employment since the downturn in 2008. The Congressional Budget Office estimates that potential GDP in 2016 is down by 10.5 percent (almost $2.0 trillion) from the level it had projected for 2016 back in 2008, before the downturn.
This is real money, over $6,200 per person. But if we want to have a little fun, we can use a tactic developed by the deficit hawks. We can calculate the cost of austerity over the infinite horizon. This is a simple story. We just assume that we will never get back the potential GDP lost as a result of the weak growth of the last eight years. Carrying this the lost 10.5 percent of GDP out to the infinite future and using a 2.9 percent real discount rate gives us $172.94 trillion in lost output. This is the size of the austerity tax for all future time. It comes to more than $500,000 for every person in the country.
By comparison, we can look at the projected Social Security shortfall for the infinite horizon. According to the most recent Social Security Trustees Report, ** this comes to $32.1 trillion. (Almost two thirds of this occurs after the 75-year projection period.) Undoubtedly many deficit hawks hope that people would be scared by this number. But compared to the austerity tax imposed by the deficit hawks, it doesn't look like a big deal.
Oct 22, 2016 | www.nakedcapitalism.com... ... ...
ReaderOfTeaLeaves made an important observation yesterday on a post by Bill Black , i n reply to a comment by another NC regular and sometimes guest blogger, Clive . It describes a set of seductively inaccurate metaphors used to depict banking, money, and finance. Needless to say, some of the recent coinages, like "sharing economy" are downright Orwellian yet taking hold, but the older ones, by being well worn tropes, are so routine that the implicit messaging gets nary a thought.
By ReaderOfTeaLeavesClive, FWIW, I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs.
Hence, what matters is 'efficiency': it's moneyAsEngineSpeak, so to speak.
Lordy, it's all petrochemical: from a time when chemical and mechanical engineering (and physics) were in their relative infancies and whaling schooners were sailing out of Nantucket.
Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics.
In that paradigm, Bill Black is a mere scold, an oddball, a scruffy prophet in the wastelands, so to speak.
If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!"
Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore.
Timmy Geithner is probably not a fan of: (a) Bill Black or (b) the idea of money as inherently social. Fuel is an emotionally sterile construct to work within; it enables one to avoid moral qualms, or any sense of personal responsibility when ' engines blow up', or when they 'run out of fuel '.
The fact that Haldane's observations and analysis are not more widely embraced suggests that somehow the business schools, economics departments, and bankers all still use thought processes shaped in the era of whalers seeking blubber for lanterns and lamps. Also, they probably still receive endowments from the Kochs, Exxon, and other fuel obsessed interests.
Until the metaphors move to biology, with a concomitant recognition that some kinds of ' fuel ' (aka Coke, Fritos, Doritos, donuts) work for short-term energy bursts, but carry extremely negative longer term costs, I doubt that even the best attempts to muddle through will get us out of this mess. Without amendment, this system is going to do one of two things: (1) implode (not too violently) or else (2) blow up (social unrest).
I have no idea what the banker equivalent of 'chard, lettuce, and celery' would be, but some bright mind ought to be thinking about it. (You distinguish yourself as such a mind; I hope that my metaphor is not too offensive…)
I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. Then I read your comment, esp:
the U.K. government is stuck with its vast holding in RBS. The only way it could ever be rid of the RBS albatross is for RBS to have some vague hope of (eventually) earning its way back to being something other than a complete basket case.
Apart from, ironically, the central banks' own ZIRP policy, the biggest threat to this is endless redress for wrongdoing.
The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction.
Banking needs to be completely rethought, using the social sciences, which include the realities of criminal conduct corroding the system to such a degree that it is threatening to implode. I'm moving toward being agnostic as to whether this is a good thing, or not. Either way, the present systems as I've read you describe them do not seem even remotely sustainable.John Merryman October 22, 2016 at 7:21 amEdward Morbius October 22, 2016 at 8:54 pm
The metaphor I think applies is that we use money as both medium of exchange and store of value. While the first is inherently dynamic, the second is static, so a good analogy is that in the body, the medium is blood, while the store is fat. The trick has been how to store extreme amounts of notional wealth and that is largely by having the government borrow it back out and spend in ways which support the private sector, but don't compete with it in the hunt for profits. So are all those pallets of money going to fund our wars really about war, or is it about keeping that money flowing in one end and out the other? Consider all those super secure US savings bonds are mostly just being poured down various rat holes, rather then building a sustainable society.
This probably goes back to Roosevelt, who borrowed a lot of unemployed capital to put a lot of unemployed workers back to work.
Money is not a commodity to be mined or manufactured, whether gold or bitcoin, but a contract. Every asset is the other side of an obligation. It allows a large economy to function, but it also reduces community reciprocity, creating atomized societies.
Like blood, the economy needs very regulated amounts of money, as it functions as a voucher system and storing lots of excess vouchers eventually causes the system to collapse, when everyone tries to dump them at once. If government threatened to tax excess out, people would have to find other ways to store value, like in stronger communities and healthier environments, aka the commons. Most people save for the same general reasons, housing, healthcare, retirement, etc, which are ultimately community functions anyway.
Finance as a public utility doesn't have to be subservient to government. Much as government is analogous to the central nervous system, finance is to the circulatory system and the head and heart are separate organs.
Government started out as a private business, institutionalized as monarchy, before becoming a public utility. Now is the time to do the same with finance.
Never let a good crisis go to waste.PuzzleMonkey October 22, 2016 at 7:30 am
I'm leaning strongly to the idea that money is information . More specifically, it's information about general claims on national commerce. That gold coin in your hand is a bidding right . The obligation isn't to any one person, but your possession of it means that there's one less gold coin's bidding power throughout the rest of the economy.
I'm still sorting out my thoughts on this, but Frederick Soddy, the Technocrats (a short-lived 1920s – 1930s US movement), and the ecological economists (Georgescu-Roegen, Daly, Boulding, etc.) seem to make more sense to me.
The more I read of traditional / classical / neoclassical / post-Keynesian monetary theory the more I suspect nobody has much of a clue.scott 2 October 22, 2016 at 8:13 am
Excellent and original points that make a tremendous amount of sense. Thank you.
One tiny quibble. It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway.BecauseTradition October 22, 2016 at 9:14 am
US Grant rode in a horse-drawn carriage from his inauguration to a White House lit with coal-gas, while oil or candles. Medicine, sanitation, and agriculture was hardly different than it was in Roman times. The railroad and the telegraph represented technological progress.
A little more than 30 years later McKinley rode in an automobile to a White House lit with electric lamps, that had running water and sewage. Steel framed buildings could rise more the 3-4 stories off the ground. The causes of many diseases were known and somewhat preventable. The first radio transmission was months away, and the first powered flight was 3 years away. The standard of living of an average American doubled during that period. And it was all done under the gold standard.
DGP per capita of the US peaked in 1973, the same time Bretton Woods formally ended. A dollar today buys what 3 cents could buy when the Fed was formed. Do these FACTS escape the Krugmans of the world or are they merely inconvenient and in conflict with what seems to be the true nature of academic economics, to provide pseudo-science cover to political policy?Tinky October 22, 2016 at 9:28 am
By all means let's go back to worshipping a dumb, shiny metal rather than, for instance, removing all priviledges for the banks. And let's replace theft by inflation and deflation with theft by deflation alone.
And let's confuse correlation with cause since the massive gold and silver strikes during that period greatly increased the money supply and indeed, in some places, caused huge price inflation. And let's forget that it is the government's authority to tax that gives value to fiat and give gold owners a huge bonanza by making fiat needlessly expensive.Pespi October 22, 2016 at 10:36 am
Setting aside your implied straw man, that it's a binary choice between unconstrained credit creation, and "worshipping" gold, would you argue that today's society is better or worse than that of 1970, just before the final (golden) constraint was broken?craazyboy October 22, 2016 at 1:54 pm
Does the answer to this question answer the question? Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all.BecauseTradition October 22, 2016 at 11:48 am
Or both. Hitler thought Chartalism (grandfather to MMT) was a great idea, then invaded France and stole France's sizeable gold horde too! These greedy people want it all!Tinky October 22, 2016 at 12:38 pm
just before the final (golden) constraint was broken? Tinky
The central bank should not be allowed to create fiat for the private sector (e.g. Open Market Purchases) AT ALL so no constraint is needed there other than absolute prohibition.
As for the monetary sovereign, price inflation is a restraint wrt fiat creation since the voters hate it.
Also, please note that the demand for fiat is greatly reduced via other privileges for the banks. Eliminate those and the demand for fiat shall greatly increase – greatly increasing the amount of new fiat that can created without significant price inflation. This will be especially the case when government provided deposit insurance is properly abolished since a huge amount of new fiat should be required*.
*For the xfer of at least some currently insured deposits to inherently risk-free accounts at a Postal Checking Service or equivalent.JTMcPhee October 22, 2016 at 12:55 pm
Sounds good in theory, but how do you imagine that we might get to the point at which central banks are prohibited from creating credit for the private sector?John Zelnicker October 22, 2016 at 9:49 am
How much of that fiat creation gets done via electronic means? Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure?
I mean, "they" can leverage and disappear and derivatize "capital" and ZIRP and NIRP with impunity, and steal people's homes and garnish and change contract terms on personal accounts unilaterally.
Is there a turnabout, or are "we" so terrified of "instability" (where no "stability" really exists, "disruption " and all that, not to act? As well demonstrated in many posts in this very blog, it's not like the Fortress of FIRE's walls are any stronger than the foundations it is "coded" on…BecauseTradition October 22, 2016 at 10:08 am
@scott 2 – "A dollar today buys what 3 cents could buy when the Fed was formed."
That something is true does not make it relevant; it can also be misleading. The real (domestic) purchasing power of a dollar is determined by the amount of labor it takes to earn that dollar. With the gains in labor productivity since 1913, it takes much less labor to earn today's dollar than it took to earn that 3 cents 103 years ago. Comparing the nominal cost of a loaf of bread in 1913 with its nominal cost today tells us nothing useful.OpenThePodBayDoorsHAL October 22, 2016 at 6:52 pm
Adding that deflation rewards risk-free money hoarding – a self-defeating strategy since progress requires taking risks.OpenThePodBayDoorsHAL October 22, 2016 at 7:09 pm
Yes isn't it awful when the prices of goods and services go down, I hate it when I have to spend less money to eat and obtain shelter and all of the other necessaries of life.
Agricultural productivity rises so food costs less; industrial productivity rises so goods cost less; and these are what is known as "progress". Increasing productivity is what raises our standard of living.
But ah, there's a fly in the ointment, we have a debt-based money creation system. Problem
1.): Banks can print the principal but they can't print the interest. This leads to Problem
2.): people borrow either because they think they can grow money faster than the debt service, or because they are desperate and have no other choice.
Problem 2 (a) is that debt pulls demand from the future to the present, and when enough demand is pulled forward people will no longer feel they should borrow for future growth because there is none in sight. This leaves only desperate people borrowing to service existing outstanding debt and that prophecy fulfills itself.
We are told this is somehow a "steady state" system but that is mathematically and obviously incorrect. Even with unnatural acts like interest rates below zero (how can time preference be below zero, and what does that say for the prospects for growth?) the system winds down and needs to be completely reset.
The percentage of times that debt-based currency systems have failed in the past and gone to zero = 100…leave it to
alchemistseconomists to insist they can pull it off though.craazyboy October 22, 2016 at 7:19 pm
Like the Soviet Union we now live in an era of centrally-planned price fixing for the most important price of all in the economy: the price of money.
It's true that in eras where the price of money fluctuated wildly there were also wild fluctutaions in the economy, booms and busts.
But someone made the statement: "The Fed makes the economy more stable. But I do not think that word means what you think it does".
So no more busts…and no more booms, either. So put the periods of fastest economic growth and fastest rises in the standard of living out of your mind, those are history. And given the mathematics of "unlimited" debt creation, we'll get the bust anyway.Vatch October 22, 2016 at 8:15 pm
There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course.
Some people seem to have this idea that x amount of money was created to buy a car, but none was made to pay the interest. This causes the world to end. Not so. Money circulates and we know that around a trillion or so in circulation seems to be enough to support our $18 T in annual GDP. What is does mean is to pay off the 5 year car loan, you spent 4 years paying off the car and another year paying the interest.
A benefit of interest is it may allow people to live past retirement age – but there there is little economic focus on this phenomena.craazyboy October 22, 2016 at 8:51 pm
There is nothing wrong with interest, as long as the rate is reasonable.
In principle this is true, but it leads to a paradox in an economy in which money is based on debt. You start your second paragraph with an acknowledgement of this, but then you back down. In such an economy, money is created when it is loaned - this money is the principal of the loan. When the money is paid back, the money disappears.
But wait - the debtor must also pay back more than the principal of the loan; he or she must also pay back the interest. How is the interest created? The same way as the principal, but it is created by someone else's loan. So in a debt based economy, the amount of money in existence is less than the total amount of people's debts.
If everyone is thrifty, and pays back their loans promptly, some people will never be able to get the money to pay their interest. It's a game of musical chairs.OpenThePodBayDoorsHAL October 22, 2016 at 10:06 pm
Pretty close, but consider this. The loan got paid back, the "money" disappeared, but the bank gained it as new loan capacity. The bank makes a new loan. So far I think I'm repeating what you stated. One minor problem is you say money is less than debt – it will be – debt is the contract for the entire amount. But not everyone pays it all off at once – we just need the liquidity to be there so the payor's personal bank account, or the one of their employer, doesn't run dry.
So at this point it's a matter of the banking system and the Fed managing liquidity. But the size of the Fed balance sheet and reserves steadily increases over the years to account for growth and any other liquidity needs the banks may have. It's either done directly with banks – buying treasury bond assets or loans to banks, or they buy Treasuries in the market, the money goes somewhere, then there is interbank lending to make it go where it's needed. (all in theory, of course. But the theory seems sound, when uncorrupted.)craazyboy October 22, 2016 at 10:24 pm
You make it sound like a steady state system, but it's not, debt is *always* issued in excess of people's capacity to pay whether for political, psychological, or other reasons. The Fed knows this. So they desperately want to reduce the total indebtedness by inflating it away, and this puts everyone on a giant rat race treadmill, working two jobs trying to outrun the rise in prices. Given the rise in productivity we're all supposed to be living like the Jetsons by now but Oh No gatta keep running to stay in one place.
The Fed has forgotten that there is another way to reduce serial overindebtedness and that is B-A-N-K-R-U-P-T-C-Y. It has the added advantage of being an actual capitalistic endeavor, and not the inverted hyper-socialism we have today.The Fed keeps putting out brush fires so the dead wood keeps building up, eventually there is an unholy crowning conflagration that takes the whole forest with it.Sluggeaux October 22, 2016 at 2:12 pm
Firstly, I said there is nothing wrong with interest . If you want to shift to "could something go wrong with principal_plus_interest in a fractional reserve central banking system", then, why yes! Plenty!
No, the system is by no means steady state – the economy has ups and downs and there are those occasional "credit crunch" periods where banks get spooked over some such thing and stop lending completely and then it seems like all the money disappeared. But that's why we have the Fed and everyone furiously managing liquidity.uncle tungsten October 22, 2016 at 10:07 pm
Since we're on a terminology thread (and my grandfather was a whaler), the whaling vessels out of Nantucket tended to be square-rigged - barques, brigs, etc. Schooners were coastal vessels used by fishermen more often than by whalers, who travelled long distances to launch their hunts.
Great post - I want to puke every time I hear Wall Street referred to as an "economic engine." More like "social engineering" - of fraud schemes.Moneta October 22, 2016 at 8:32 am
Ah! a new term is coined (pun intended):- fraudgineering always included in any sentence where the words "Wall Street" or a named bank is used.Moneta October 22, 2016 at 8:38 am
A couple of generations ago most people lived on farms. Many would trade grain to pay the miller. In essence, hard cash was needed for goods at the general store.
Debt was used to finance big projects that were based on hard assets, land, commodities.
Fast forward to today…. banks still favour collateral based on hard assets yet services are a much bigger part of our economy. I would venture to say that banks lend on soft collateral when it is fed by sectors that have hard asset collateral or with a government guarantee.
IMO, get government out of everything and watch the economy drop to an economy of sustenance based on hard asset collateral which will get increasingly constrained with world population going from 7 to 9B. Exactly what rentiers LOVE!scott 2 October 22, 2016 at 8:57 am
Services are a bigger measured part of our economy. Family members on farms would do all kinds of work or services but these were not recorded.lyman alpha blob October 22, 2016 at 10:06 am
Debt was used to finance increases in productivity. Unless you have a sweat shop in your basement, a house is not a productive asset. It's a slowly appreciating consumer of capital, real and financial (utilities, maintainance, and taxes). In distorted markets like California, it can make a lucky few a lot of money while turning the area into a feudal system of land owners and serfs.
A side effect of financialization has been to turn the US economy into one that lives, temporarily, on housing speculation. When people realize that spending $2 million on a bungalow that should only cost $40K is the TRUE mis-allocation of capital, let's hope they don't realize that all at once.John Zelnicker October 22, 2016 at 12:22 pm
A couple generations ago land in many places was still relatively cheap. Asked my father once how our family of dairy farmers managed to have as much land as we do and was told that my grandfather often received land as payment. He'd give someone an animal or a side of beef and they'd give him an acre they owned abutting his property that they weren't using for anything anyway. I've seen some of the old ledgers found in his attic and as you noted, cash was not just in essence but in fact used for goods at the general store. The barn itself was built with the help of the community although I'm not sure how that was paid for but I'd wager that any financing was minimal.
The economy was a few steps above just sustenance but the population was a lot less and there weren't nearly as many rich people from the city coming in looking for second (or 3rd or 4th) homes in the country driving up the cost of real estate. Two generations later land is much more dear to the point where our family likely wouldn't be able to afford to purchase property if they needed extra acreage.
There are far too many economists who seem to think that money actually does grow on trees in the sense that it's a naturally occurring resource that human beings can't control – it's all determined by markets. In that sense I'd describe money not so much as a fuel but as a weapon. I believe Jon Perkins had a similar description in his Confessions of an Economic Hitman. Weaponized war is no longer the first option among advanced economies – first they'll try to bleed other countries dry with economics. It's only when the victims won't cave that the bombs start dropping now.
But money does not occur naturally and it should not be considered a fuel or a weapon. As noted in the article it's a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few.TheCatSaid October 22, 2016 at 2:05 pm
@lyman alpha bob – "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few."
Adding: The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected.Steve H. October 22, 2016 at 8:37 am
Weaponizing money. That's a valuable concept. It reminds me of the end of David E. Martin's (true-story-called-fiction-to-avoid-lawsuits) book "The Apostles of Power". And this was the reason he wrote the book, actually–to fend off a major play to steal all the electronically-stored reserves of the Fed into their own accounts, and destroy the evidence of their actions by triggering a nuclear explosion of the precise nuclear power station that provided the power to the NYC/NJ computers that stored the data. By telling enough about the plan in process (only the minor, human-created fake "earthquake" at the Santa Ana reactor occurred, as the charges had been set before the book was published; the book predicts the "earthquake"), a nuclear disaster and major financial theft were averted.
Martin spoke about this, and the other real events described in the book, in a number of radio interviews he gave in 2012, the year the book was published.JTMcPhee October 22, 2016 at 8:58 am
Not sure if this is meta or not:
"Here's the [Machine] trick: Design the machine that will produce the result your analysis indicates occurs routinely in the situation you have studied. Make sure you have included all the parts – all the social gears, cranks, belts, buttons, and other widgets – and all the specifications of materials and their qualities necessary to get the desired result."
Howard S. Beckergriffen October 22, 2016 at 9:27 am
Well, great! That part of the great discourse has been decoded and unpacked and all that, I feel much better for the personal increase in awareness of how fokked things are.
Now, how are "we" going to get billions of other humans to the same state of awareness, to stop talking about "fuel" when talking (using a gazillion other "terms of art" and memes and tropes that are similarly opaque and whitewash and FUD-laden) about "the economy" and "economics" and while generating ever more momentum for those same deadly (but profitable for the few) terms, tropes, memes and shorthands? "Profitable" being one of them, "profit" being part of the disease process, because after all, for the individual or the firm s/he belongs to, "profit" (ignoring externalities, of course) is the summum bonum that lets you buy stuff and experiences galore?
Other Juggernaut words, just a very few: "bonus", "healthcare", "entitlement", "MArket", "free trade," and a personal favorite, "donor" meaning very simply "BRIBER/corrupter" but hey, those very few squillionaires who own everything including the "political process" are described millions of times a DAY on the intertubes as "donors," "donors" to political candidates and PACs and "think tanks" (??another fave). Giving a kidney to a person with terminal kidney failure, "donating" one's corneas and body parts or those of deeply loved ones suddenly deceased, those are ""donations." Not Koch or Adelman or Soros or Gates etc. billions to "Foundations" or operas or art museums.
"We," who are Aware, perceive some of this, often argue and debate and cavil over nitty bits of those perceptions. That is so very effective, isn't it, the few hundreds or thousands of "us" who participate in or observe the Flow in NCspace, in bringing about any kind of regression to a mean that is hardly defined or maybe undefinable, a mean that might actually be "kind" and "decent" and "fair" and "just" (whatever those terms are taken to mean)?
What is to be done about it? "We" ain't either powerful or certain enough to do something like a "global search and replace" across the entire internet, with a burning of all the books and papers, and a quarantine of all the GeithnerDimonGreenspanKrugmans and their myriad of citers and followers and extenders, that carry the infection forward into the label minds of future "policy makers" who like most humans who (I am assured by others) are wired to seek dominance and pleasure and reproductive success? And who obviously are the dominant, successful vector and segment of the "political economy?"
The plagues that Pandora was tricked into loosing on "humanity" have been out there probably too long to be re-packaged. Nice effort for those who try, try and try again, but that effort seems to me mostly pissing into the wind…Dave October 22, 2016 at 11:40 am
TINA. Sadly it's true, we appear somewhat stuck in this mode of what's working. I personally appreciate the credit union / co-op model of accomplishing financial intermediation but that is also a continuation of what we have.
Biggest problem in the US, no one competing with the FED.Dave October 22, 2016 at 11:48 am
"some of the recent coinages, like "sharing economy" are downright Orwellian". Yes, but that phrase can be and is easily replaced in casual conversation with "the sharecropper economy". (Be prepared to deliver a short explanation what a sharecropper is to the youg 'uns.)
Another valid word out of the past is "the man," as in the giver of overpriced credit to the sharecropper who often ended up with zero profits and thus was kept in perpetual debt. Central bankers?
"The company store" is another one. Applepay?
"Papal indulgences" another. Hillary?
Word substitution is a fun game.diptherio October 22, 2016 at 12:24 pm
Speaking of Big Brother, how can we forget "Thought leader"Jeremy Grimm October 22, 2016 at 5:33 pm
Everybody talks about "thought leaders" but no one ever talks about "thought followers," much less actually claims to be one. But without "thought followers" how can you have "thought leaders"? I'm suspicious….
And anyway, wouldn't "thought leader" be applicable to anybody whose thinking ends up being followed by others, for good or ill? Wouldn't Charles Manson be a "thought leader"? He certainly was for the Manson Family….just a thought…Steven October 22, 2016 at 12:28 pm
I always thought the exhortation to be thought leaders was a ruse for encouraging people to speak up and try to act as thought leaders. That way those who worked us could identify the taller daisies and thereby identify which flowers to top.Moneta October 22, 2016 at 1:27 pm
Seems like some combination of Frederick Soddy and Michael Hudson is called for here. Soddy is apparently a tough slog even for otherwise intelligent people. So at the risk of over-simplification here is my attempt to convey his ideas about money and wealth:
Money is not wealth. It is a claim on wealth, i.e. debt.
Wealth. Soddy provides both a practical and a more abstract definition of (the ingredients of) wealth:
"But economics, in a national sense, is concerned with wealth as what is produced by human beings to maintain their lives.
Discovery, Natural Energy and Diligence, the Three Ingredients of Wealth
For Discovery, think research and development (R&D) and of course education so R&D is even possible. For Natural Energy, think, for most of the Industrial Revolution (IR), fossil fuels. (Pretty obviously we need to do something different if we want to keep the machine the IR built functioning, sustainably producing the wealth which sustains our civilization.)
One of my favorite passages from Soddy's "Wealth, Virtual Wealth and Debt" is:
"As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science."
But without a science-based definition of wealth, i.e. continuing to use profit and money as a measure of 'productivity', just 'printing' more money (even Hudson's MMT) will solve nothing. Put these observations together and you get an idea what should 'back' money – wealth not gold or as Hudson puts it "Debts that can't be repaid (and) won't be."
Hudson's 'clean slate' provides the other part of the solution. As Hudson notes, the 'miracle of compound interest' is not sustainable – particularly when the West's 'financial engineers' are busy cranking out money (as debt) at rates well in excess of going interest rates. Just continuing to use profit and money as a measure of 'productivity', 'printing' more money (even Hudson's MMT) will solve nothing. Probably by the middle of the 20th century, the West had 'enough' wealth its people could begin to find other purposes in life than creating ever more of it (to make ever more money, i.e. acquire ever more debt to be paid by someone – the unborn?). Again from Soddy / Ruskin – real "Wealth rots." That's what's happening to the West's 'culture' as its ruling classes mindlessly attempt to acquire ever more money.
It isn't just the 1% who are going to have to take their lumps, to stop playing games with the world's future so they can, as candidate Trump put it, 'run up a bigger score' with money for which they have no immediate need. It is those of us in the 99% who do not possess the skills and aptitudes required for the genuine creation of wealth, wealth the world needs and can sustainably afford. Those numbers are going to grow as the Industrial Revolution succeeds, with human labor and rote intelligence replaced more and more by machines powered by "natural energy". But, even if we can't find our niche, I take it as a given that we are all born with a right to life.redleg October 22, 2016 at 12:50 pm
Wealth is hard to define because what we view as wealth might be a money pit that guarantees our decline…
For example, instead of injecting money directly in the faculty of medicine, a university might have decided to fund a football team to attract the capital and end up building a stadium… Instead of just funding the faculty.
All these activities related to the sports team contribute to GDP. The bankers might have been productive and efficient in raising capital, the coach might be productive and make a winning team, the builders of the stadium might have been very productive building a fine structure but all these activities sucked up resources and energy that could have been used by other sectors to better serve the future of the country. Maybe these activities are totally unsustainable. They might appear as wealth currently but will lead to poverty over time.
Since ou basic needs have been met, we have been investing in a forever greater number of non-essential resource intensive activities which show how disconnected we have become from the earth supporting us.Edward Morbius October 22, 2016 at 8:51 pm
All the analogues to fuel and engines, yet nobody takes the next step to Power. Power is the key to both engines and finance.
Hudson, Black, Keen and other non-mainstream people are exceptions, but is anyone listening to them besides this choir?Les Swift October 22, 2016 at 1:13 pm
"Wealth, as Mr Hobbes says, is power." Adam Smith, Wealth of Nations . It's only the second discussion (after definition) of the term in the book.
Smith doesn't get everything right, but he's considerably more savvy and left-wing, bleeding-heart liberal than he's commonly given credit for.tongorad October 22, 2016 at 2:40 pm
The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives.
One of the biggest problems people face in discussing matters financial, is that the very terminology of the system undercuts the critiques. Just as criticizing the wars invokes in some the specter of failing to support the troops and the specter of criticizing America, criticizing Wall Street's predatory aspects invokes in many the specter of criticizing institutions we have been led to believe represent the essence of American freedom. Doing so makes you at least a malcontent or troublemaker, and maybe even some sort of subversive pinko. Either way, you're rocking a boat many do not want rocked.
Using analogies and metaphors to discuss such matters can outflank the loaded-terminology question to a significant degree. You can cut through a lot of the fog of jargon by describing the activities in other terms. (E.g., Dave's "sharecropping" for "sharing economy.")
We are in an era in which the financial world is being downsized and consolidated, the giant speculative bubble which dominated most of our lives is being deflated and wound down before our eyes. There is still speculative activity, to be sure, but there is also a rise in the use of rentier income. This downsizing process involves shifting losses wherever possible down the food chain, including to institutions which previously were integral parts of the system. Insiders are finding themselves outsiders, jettisoned by other insiders.
This reminds me of the situation of a pack of wolves, grown large in an era of plentiful food, but now finding that food supply dwindling. The pack must shrink to survive, the excess members culled in often brutal ways. The strongest eat the most, the rest are left with the scraps, or nothing at all. The financial system is similar, a pack in which the herd is being culled. Individual institutions, even important ones like Barings or Lehman, are ephemeral. They come and they go, just like individual wolves in the pack. But the pack lives on, and so does the financial system. To the wolves, the pecking order, who lives and who dies, is very important. But for the creatures the pack eats, such concerns are irrelevant.moneta October 22, 2016 at 2:44 pm
Either way, you're rocking a boat many do not want rocked.
Perhaps. Or perhaps the alternatives to our ruling narratives and power mechanisms have been ruthlessly dismantled and extinguished. For example, I would love to join a union. But I live in a right-to-work state.
I would love to have representation at my workplace and have some degree of bargaining power. I guess there's always the complaint box. Or the "freedom" to hit the bricks.
Luckily, I went to school when it was affordable, so I don't have student loan debt. I rent, and although rents continue to rise every year, I don't have a mortgage hanging over my head.
My younger colleagues are saddled with outrageous student loan debt that they will never likely repay. Unfortunately many/most of them bought into the housing market. How likely are they to even entertain the idea of speaking truth to power?
I'm past 50, and you know what that means to my prospects of finding another job. Young and old, we just keep our mouths shut and do what we're told.Jeremy Grimm October 22, 2016 at 5:51 pm
The US represents 5% of world population but consumes a much larger share of world energy and resources. The 99% are concerned about fairness but if they truly cared, they'd understand that the global economy needs to shrink their share of resources to 5%. And the leveling is getting stronger by the day. Most people go along the big lie because of hope.moneta October 22, 2016 at 6:13 pm
Question about your numbers - I think our share of resources needs to shrink but I'm not sure 5% is the right number. Are some of the resources in that 5% dedicated to our Industry? Is our industry productive? and who gets the stuff? It may be we need to shrink our use of resources to 4%. And what about the who uses how much of what resources? How do you count the resources used to support our car, bus, and truck industries while deliberately stifling mass transit. I only make these quibbles to avoid your logic of proportions. Clearly we must take/steal less from the rest of the world and share what we have. I believe there is enough to go around - once a few (quite a few) problems here and there are taken care of.
I'm not sure how much hope continues to hold up the big lie. I think the supports for the big lie need a lot of maintenance to keep it from falling. Maybe we can simply stop using that road.Vatch October 22, 2016 at 8:25 pm
I don't know what the number is but from my vantage point , it looks like the western work is heading for a world of pain. Americans want America to be great again but it's based on materialism.
To be great again would mean a different kind of greatness where the economy is based on a reduction of it share of resources.
But the population is still very far away from the fact that its way of life depends on an unfair distribution of world resources which will probably lead to a big world struggle meaning a focus on the military.
This is not what I want by what I see in the horizon.
There's a reason money and fuel are in the same sentence. It's because the a nation's power depends on energy.Jeremy Grimm October 22, 2016 at 8:39 pm
It might seem trite, but if an American is patriotic, he or she will try to reduce the nation's energy use by using energy efficiently. Whether it's transportation, home heating, home cooling, or nighttime illumination, one should use the energy efficiently. Aside from the immorality of using so much more than many other people in the world, it's a way to reduce pollution and to avoid sending money to the Wahhabi nut jobs in Saudi Arabia. Plus, energy efficiency saves money!Orn October 22, 2016 at 1:17 pm
I think you and I are on the same page.
Our country has the capacity to help the world get through the crises of Global Warming and the end of oil. Our country has responsibility as one of the guilty parties - one of the most most guilty in taking more than our share and sharing less than we are able or should share. The meaning of riches is best enjoyed through the sharing of those riches. In ancient times - at least in some places - that was the privilege and obligation of the rich.
I would feel deep shame for our country if it is to be remembered in the future for what it has done so far.knowbuddhau October 22, 2016 at 2:48 pm
An alternate metaphor could be the slime mold .Wade Riddick October 22, 2016 at 6:46 pm
Great comment, ROTL! Accords very well with my understanding of the power of metaphors, to bring into being the world stage on which we strut our stuff.
Many here at NC often comment on the quasi-religious nature of economics. I'm always struck by the conflation of the organic/natural world with mechanics. Wrongly conceiving of market forces as natural forces and so on. I think you've struck a blow against this wrong-headed mythos at its weakest point. If the metaphors that bring into being this world of pain we're living in themselves are discredited, the whole edifice could come crashing down in no time.
If anyone's interested in a little exercise, trying paying attention to the metaphors one uses for organic systems, and society at large. Even though I'm aware of their inappropriateness, it's hard not to think in mechanistic terms. And not just mechanistic, but weaponized, at that. You can't even listen to a baseball game without hearing metaphors of war all the damn time. Then there are "Twitter wars" and "Facebook wars" ad nauseaum.
I like lyman alpha blob's mention of financial warfare, too. In 2010, forensic economists found confirmation of the "economic hit man hypothesis" by studying the effectiveness of the CIA's overseas efforts wrt US exports.
If we agree that we need a most fundamental and profound change to our ways of being in the world, our use of metaphors is a great place to start.readerOfTeaLeaves October 22, 2016 at 7:16 pm
Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits.
Where does he propose business find future workers if not in wombs? From where will his future customers come?
Perhaps in sharing economy of future America, companies will have to share their dwindling customers and make do with less?
If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America?
Money weaves a supporting web of trust, a mutual network of obligations and payments – and what happens biologically when that web inside us is broken and friends become enemies and we treat enemies as friends? Is fraud any different than autoimmunity or cancer?
Well, I was gobsmacked to see this show up when I finally logged on to the Internet today. Many heartfelt thanks to all who commented so thoughtfully and insightfully; and also to the remarkable NC crew (Yves, Lambert, Jerri-Lynn, the IT folks), as well of course to Clive.
I think that we are all rooting for the time when Haldane's insights are met with 'Doh', and when we celebrate Bill Black as a Nobel in Economics ;-)
Oct 23, 2016 | www.breitbart.comIn a lengthy speech on Saturday night in Manheim, Pennsylvania, Republican nominee for president Donald J. Trump lambasted his opponent Democratic nominee Hillary Rodham Clinton for a secret tape recording of her bashing supporters of Sen. Bernie Sanders of Vermont-and even called for Clinton to be placed in prison and questioned as to whether she has been loyal to her husband former President Bill Clinton.
Trump said in the speech on Saturday night:
A new audio tape that has surfaced just yesterday from another one of Hillary's high roller fundraisers shows her demeaning and mocking Bernie Sanders and all of his supporters. You know, and I'll tell you something we have a much bigger movement that Bernie Sanders ever had. We have much bigger crowds than Sanders ever had. And we have a more important movement than Bernie Sanders ever had because we're going to save our country, okay? We're going to save our country. But I can tell you Bernie Sanders would have left a great, great legacy had he not made the deal with the devil. He would have really left a great legacy. Now he shows up and 120 people come in to hear him talk. Bernie Sanders would have left a great legacy had he not made the deal, had he held his head high and walked away. Now he's on the other side perhaps from us and we want to get along with everybody and we will-we're going to unite the country-but what Bernie Sanders did to his supporters was very, very unfair. And they're really not his supporters any longer and they're not going to support Hillary Clinton. I really believe a lot of those people are coming over and largely because of trade, college education, lots of other things-but largely because of trade, they're coming over to our side-you watch, you watch. Especially after Hillary mocks him and mocks all of those people by attacking him and his supporters as 'living in their parents' basements,' and trapped in dead-end careers. That's not what they are.
Also in his speech on Saturday night, Trump summed up exactly what came out in the latest Hillary Clinton tapes in which she mocks Sanders supporters:
She describes many of them as ignorant, and [that] they want the United States to be more like Scandinavia but that 'half the people don't know what that means' in a really sarcastic tone because she's a sarcastic woman. To sum up, and I'll tell you the other thing-she's an incompetent woman. She's an incompetent woman. I've seen it. Just take a look at what she touches. It never works out, and you watch: her run for the presidency will never ever work out because we can't let it work out. To sum up, Hillary Clinton thinks Bernie supporters are hopeless and ignorant basement dwellers. Then, of course, she thinks people who vote for and follow us are deplorable and irredeemable. I don't think so. I don't think so. We have the smartest people, we have the sharpest people, we have the most amazing people, and you know in all of the years of this country they say, even the pundits-most of them aren't worth the ground they're standing on, some of that ground could be fairly wealthy but ground, but most of these people say they have never seen a phenomenon like is going on. We have crowds like this wherever we go.
WATCH THE FULL SPEECH:
Later in the speech, Trump came back to the tape again and hammered her once more for it.
"Hillary Clinton all but said that most of the country is racist, including the men and women of law enforcement," Trump said. "She said that the other night. Did anybody like Lester Holt? Did anybody question her when she said that? No, she said it the other night. [If] you're not a die hard Clinton fan-you're not a supporter-from Day One, Hillary Clinton thinks you are a defective person. That's what she's going around saying."
In the speech, Trump questioned whether Clinton has the moral authority to lead when she considers the majority of Americans-Trump supporters and Sanders supporters-to be "defective" people. And he went so far as saying that Clinton "should be in prison." He went on:
How on earth can Hillary Clinton try to lead this country when she has nothing but contempt for the people who live in this country? She's got contempt. First of all, she's got so many scandals and she's been caught cheating so much. One of the worst things I've ever witnessed as a citizen of the United States was last week when the FBI director was trying so hard to explain how she away with what she got away with, because she should be in prison. Let me tell you. She should be in prison. She's being totally protected by the New York Times and the Washington Post and all of the media and CNN-Clinton News Network-which nobody is watching anyway so what difference does it make? Don't even watch it. But she's being protected by many of these groups. It's not like do you think she's guilty? They've actually admitted she's guilty. And then she lies and lies, 33,000 emails deleted, bleached, acid-washed! And then they take their phones and they hammer the hell out of them. How many people have acid washed or bleached a Tweet? How many?
He returned to the secret Clinton tape a little while later:
Hillary Clinton slanders and attacks anyone who wants to put America First, whether they are Trump Voters or Bernie Voters. What she said about Bernie voters amazing. Like the European Union, she wants to erase our borders and she wants to do it for her donors and she wants people to pour into country without knowing who they are.
Trump later bashed the media as "dishonest as hell" when calling on the reporters at his event to "turn your cameras" to show the crowd that came to see him.
"If they showed the kind of crowds we have-which people can hear, you know it's interesting: you can hear the crowd when you hear the television but if they showed the crowd it would be better television, but they don't know much about that. But it would actually be better television," Trump said.
Trump also questioned whether Hillary Clinton has been loyal to her husband, former President Bill Clinton. Bill Clinton has been known to cheat on Hillary Clinton with a variety of mistresses and has been accused of rape and sexual assault by some women.
"Hillary Clinton's only loyalty is to her financial contributors and to herself," Trump said. "I don't even think she's loyal to Bill, if you want to know the truth. And really, folks, really: Why should she be, right? Why should she be?"
Throughout the speech, Trump weaved together references to his new campaign theme about Clinton-"Follow The Money"-with details about the Trans Pacific Partnership (TPP) trade deal. He said:
We're going to take on the corrupt media, the powerful lobbyists and the special interests that have stolen your jobs, your factories, and your future-that's exactly what's happened. We're going to stop Hillary Clinton from continuing to raid the industry from your state for her profit. Hillary Clinton has collected millions of dollars from the same global corporations shipping your jobs and your dreams to other countries. You know it and everybody else knows it. That's why Clinton, if she ever got the chance, would 100 percent approve Trans Pacific Partnership-a total disastrous trade deal. She called the deal the 'gold standard.' The TPP will bring economic devastation to Pennsylvania and our campaign is the only chance to stop that and other bad things that are happening to our country. She lied about the Gold Standard the other night at the debate. She said she didn't say it-she said it. We want to stop the Trans Pacific Partnership and if we don't-remember this, if we don't stop it, billions and billions [of dollars] in jobs and wealth will be vacuumed right out of Pennsylvania and sent to these other countries. Just like NAFTA was a disaster, this will be a disaster. Frankly I don't think it'll be as bad as NAFTA. It can't get any worse than that-signed by Bill Clinton. All of us here in this massive room here tonight can prevent this from happening. Together we can stop TPP and we can end the theft of American jobs and prosperity.
Trump praised Sanders for being strongly opposed to the TPP:
I knew one man-I'm not a big fan-but one man who knew the dangers of the TPP was Bernie Sanders. Crazy Bernie. He was right about one thing, only one thing, and that was trade. He was right about it because he knew we were getting ripped off, but he wouldn't be able to do anything about it . We're going to do a lot about it. We're going to have those highways running the opposite direction. We're going to have a lot of trade, but it's going to come into our country. We are going to start benefitting our country because right now it's one way road to trouble. Our jobs leave us, our money leaves us. With Mexico, we get the drugs-they get the cash-it's that simple.
Hillary Clinton, Trump noted, is "controlled by global special interests."
"She's on the opposite side of Bernie on the trade issue," Trump said. "She's totally on the opposite side of Bernie."
He circled back to trade a bit later in the more-than-hour-long speech, hammering TPP and Clinton cash connections. Trump continued:
Three TPP member countries gave between $6 and $15 million to Clinton. At least four lobbyists who are actively lobbying for TPP passage have raised more than $800,000 for her campaign. I'm just telling you Pennsylvania, we're going to make it. We're going to make it. We're going to make it if we have Pennsylvania for sure. It'll be easy. But you cannot let this pass. NAFTA passed. It's been the worst trade deal probably ever passed, not in this country but anywhere in the world. It cleaned out New England. It cleaned out big portions of Pennsylvania. It cleaned out big portions of Ohio and North Carolina and South Carolina-you can't let it happen.
Trump even called the politicians like Clinton "bloodsuckers" who have let America be drained out of millions upon millions of jobs.
"These bloodsuckers want it to happen," Trump said. "They're politicians that are getting taken care of by people that want it to happen. Other countries want it to happen because it's good for them, but it's not good for us. So hopefully you're not going to let it happen. Whatever Hillary's donors want, they get. They own her. On Nov. 8, we're going to end Clinton corruption. Hillary Clinton, dishonest person, is an insider fighting for herself and for her friends. I'm an outsider fighting for you. And by the way, just in case you're not aware, I used to be an insider but I thought this was the right thing to do. This is the right thing to do, believe me."
Oct 23, 2016 | angrybearblog.comlikbez October 22, 2016 11:20 pmBeverly Mann October 23, 2016 12:00 pm
The key problems with Democratic Party and Hillary is that they lost working class and middle class voters, becoming another party of highly paid professionals and Wall Street speculators (let's say top 10%, not just 1%), the party of neoliberal elite.
It will be interesting to see if yet another attempt to "bait and switch" working class and lower middle class works this time. I think it will not. Even upper middle class is very resentful of Democrats and Hillary. So many votes will be not "for" but "against". This is the scenario Democratic strategists fear the most, but they can do nothing about it.
She overplayed "identity politics" card. Her "identity politics" and her fake feminism are completely insincere. She is completely numb to human suffering and interests of females and minorities. Looks like she has a total lack of empathy for other people.
Here is one interesting quote ( http://www.nakedcapitalism.com/2016/10/how-trump-and-clinton-gave-bad-answers-on-us-nuclear-policy-and-why-you-should-be-worried.html#comment-2680036 ):
"What scares me is my knowledge of her career-long investment in trying to convince the generals and the admirals that she is a 'tough bitch', ala Margaret Thatcher, who will not hesitate to pull the trigger. An illuminating article in the NY Times ( http://www.nytimes.com/2016/04/24/magazine/how-hillary-clinton-became-a-hawk.html ) revealed that she always advocates the most muscular and reckless dispositions of U.S. military forces whenever her opinion is solicited. "
Usually people are resentful about Party which betrayed them so many times. It would be interesting to see how this will play this time.beene October 23, 2016 10:31 am
It will be interesting to see if yet another attempt to "bait and switch" working class and lower middle class works this time?
Yup. The Republicans definitely have the interests of the working class and lower middle class at heart when they give, and propose, ever deeper tax cuts for the wealthy, the repeal of the estate tax that by now applies only to estates of more than $5 million, complete deregulation of the finance industry, industry capture of every federal regulatory agency and cabinet department and commission or board, from the SEC, to the EPA, to the Interior Dept. (in order to hand over to the oil, gas and timber industries vast parts of federal lands), the FDA, the FTC, the FCC, the NLRB, the Consumer Product Safety Commission, and the Justice Dept. (including the Antitrust Division)-to name only some.
And OF COURSE it's to serve the interests of the working class and lower middle class that they concertedly appoint Supreme Court justices and lower federal court judges that are unabashed proxies of big business.
And then there's the incessant push to privatize Social Security and Medicare. It ain't the Dems that are pushing that.
You're drinking wayyy too much Kool Aid, likbez. Or maybe just reading too much Ayn Rand, at Paul Ryan's recommendation.likbez October 23, 2016 12:56 pm
I would suggest despite most of the elite in both parties supporting Hillary, and saying she has the election in the bag is premature. In my opinion the fact that Trump rallies still has large attendance; where Hillary's rallies would have trouble filling up a large room is a better indication that Trump will win.
Even democrats are not voting democratic this time to be ignored till election again.
=== quote ===
Yup. The Republicans definitely have the interests of the working class and lower middle class at heart when they give, and propose, ever deeper tax cuts for the wealthy, the repeal of the estate tax that by now applies only to estates of more than $5 million, complete deregulation of the finance industry, industry capture of every federal regulatory agency and cabinet department and commission or board, from the SEC, to the EPA, to the Interior Dept. (in order to hand over to the oil, gas and timber industries vast parts of federal lands), the FDA, the FTC, the FCC, the NLRB, the Consumer Product Safety Commission, and the Justice Dept. (including the Antitrust Division) -- to name only some.
And OF COURSE it's to serve the interests of the working class and lower middle class that they concertedly appoint Supreme Court justices and lower federal court judges that are unabashed proxies of big business.
=== end of quote ===
This is all true. But Trump essentially running not as a Republican but as an independent on (mostly) populist platform (with elements of nativism). That's why a large part of Republican brass explicitly abandoned him. That does not exclude that he easily will be co-opted after the election, if he wins.
And I would not be surprised one bit if Dick Cheney, Victoria Nuland, Paul Wolfowitz and Perle vote for Hillary. Robert Kagan and papa Bush already declared such an intention. She is a neocon. A wolf in sheep clothing, if we are talking about real anti-war democrats, not the USA brand of DemoRats. She is crazy warmonger, no question about it, trying to compensate a complete lack of diplomatic skills with jingoism and saber rattling.
The problem here might be that you implicitly idealize Hillary and demonize Trump.
I would agree that Trump is horrible candidate. The candidate who (like Hillary) suggests complete degeneration of the US neoliberal elite.
But the problem is that Hillary is even worse. Much worse and more dangerous because in addition to being a closet Republican she is also a warmonger. In foreign policy area she is John McCain in pantsuit. And if you believe that after one hour in White House she does not abandon all her election promises and start behaving like a far-right republican in foreign policy and a moderate republican in domestic policy, it's you who drunk too much Cool Aid.
That's what classic neoliberal DemoRats "bait and switch" maneuver (previously executed by Obama two times) means. And that's why working class now abandoned Democratic Party. Even unions members of unions which endorses Clinton are expected to vote 3:1 against her. Serial betrayal of interests of working class (and lower middle class) after 25 years gets on nerve. Not that their choice is wise, but they made a choice. This is "What's the matter with Kansas" all over again.
It reminds me the situation when Stalin was asked whether right revisionism of Marxism (social democrats) or left (Trotskyites with their dream of World revolution) is better. He answered "both are worse" :-).
In other words, the USA [workers and middle class] now is in the political position that in chess is called Zugzwang: we face a choice between the compulsive liar, unrepentant, extremely dangerous and unstable warmonger with failing health vs. a bombastic, completely unprepared to governance of such a huge country crook.
Of course, we need also remember about existence of "deep state" which make each of them mostly a figurehead, but still the power of "deep state" is not absolute and this is a very sad situation.
Beverly Mann, October 23, 2016 1:57 pm
Two points: First, you apparently are unaware of Trump's proposed tax plan, written by Heritage Foundation economists and political-think-tank types. It's literally more regressively extreme evn than Paul Ryan's. It gives tax cuts to the wealthy that are exponentially more generous percentage-wise than G.W. Bush's two tax cuts together were, it eliminates the estate tax, and it gives massive tax cuts to corporations, including yuge ones.
Two billionaire Hamptons-based hedge funders, Robert Mercer and his daughter Rebekah, have been funding a super PAC for Trump and since late spring have met with Trump and handed him policy proposals and suggestions for administrative agency heads and judicial appointments. Other yuge funders are members of the Ricketts family, including Thomas Ricketts, CEO of TD Ameritrade and a son of its founder.
Two other billionaires funding Trump: Forrest Lucas, founder of Lucas Oil and reportedly Trump's choice for Interior Secretary if you and the working class and lower middle class folks whose interests Trump has at heart get their way.
And then there's Texas oil billionaire Harold Hamm, Trump's very first billionaire mega-donor.
One of my recurring pet peeves about Clinton and her campaign is her failure to tell the public that these billionaires are contributing mega-bucks to help fund Trump's campaign, and to tell the public who exactly they are. As well as her failure to make a concerted effort to educate the public about the the specifics of Trump's fiscal and deregulatory agenda as he has published it.
As for your belief that I idealize Clinton, you obviously are very new to Angry Bear. I was a virulent Sanders supporter throughout the primaries, to the very end. In 2008 I originally supported John Edwards during the primaries and then, when it became clear that it was a two-candidate race, supported Obama. My reason? I really, really, REALLY did not want to see another triangulation Democratic administration. That's largely what we got during Obama's first term, though, and I was not happy about it.
Bottom line: I'm not the gullible one here. You are.
likbez, October 23, 2016 2:37 pm
You demonstrate complete inability to weight the gravity of two dismal, but unequal in their gravity options.
All your arguments about Supreme Court justices, taxes, inheritance and other similar things make sense if and only if the country continues to exist.
Which is not given due to the craziness and the level of degeneration of neoliberal elite and specifically Hillary ("no fly zone in Syria" is one example of her craziness). Playing chickens with a nuclear power for the sake of proving imperial dominance in Middle East is a crazy policy.
Neocons rule the roost in both parties, which essentially became a single War Party with two wings. Trump looks like the only chance somewhat to limit their influence and reach some détente with Russia.
Looks like you organically unable to understand that your choice in this particular case is between the decimation of the last remnants of the New Deal and a real chance of WWIII.
This is not "pick your poison" situation. Those are two events of completely difference magnitude: one is reversible (and please note that Trump is bound by very controversial obligations to his electorate and faces hostile Congress), the other is not.
We all should do our best to prevent the unleashing WWIII even if that means temporary decimation of the remnants of New Deal.
Neoliberalism after 2008 entered zombie state, so while it is still strong, aggressive and bloodthirsty it might not last for long. And in such case the defeat of democratic forces on domestic front is temporary.
That means vote against Hillary.
Oct 23, 2016 | www.nakedcapitalism.com
An excellent article
It should be remembered that fascism does not succeed in the real world as a crusade by race-obsessed lumpen. It succeeds when fascists are co-opted by capitalists, as was unambiguously the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives: socialism and communism.
That's because there is no more effective counter to class consciousness than race consciousness. That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the United States. The contradictions between black and white labor formed a ready-made wedge. The North's abhorrence at the spread of slavery into the American West before the Civil War had more to do a desire to preserve these new realms for "free" labor-"free" in one context, from the competition of slave labor-than egalitarian principle.[…]
There is more to Clintonism, I think, than simply playing the "identity politics" card to screw Bernie Sanders or discombobulate the Trump campaign. "Identity politics" is near the core of the Clintonian agenda as a bulwark against any class/populist upheaval that might threaten her brand of billionaire-friendly liberalism.
In other words it's all part of a grand plan when the Clintonoids aren't busy debating the finer points of her marketing and "mark"–a term normally applied to the graphic logo on a commercial product.
www.newsbusters.orgHave you heard that Hillary Clinton is the "first woman" ever to be nominated for president by a major political party? Of course you have. The media have repeated the line so often it is broken news.
Hillary Clinton's nomination and the euphoria in the press (one NPR female reporter said she has seen women weeping over the possibility of Hillary becoming president) eclipses any discussion about the real issues facing the country.
To quote Clinton in another context, "what difference does it make" that she is a woman? A liberal is a liberal, regardless of gender, race or ethnicity.
Must we go through an entire list of "firsts" before we get to someone who can solve our collective problems, instead of making them worse? Many of those cheering this supposed progress in American culture, which follows the historic election of the "first African-American president," are insincere, if not disingenuous. Otherwise, they would have applauded the advancement of African-Americans like Gen. Colin Powell, Justice Clarence Thomas, former one-term Rep. Allen West (R-FL), Sen. Tim Scott (R-SC) and conservative women like Sarah Palin, Rep. Marsha Blackburn (R-TN), former presidential candidate Carly Fiorina, Rep. Mia Love (R-UT) and many others.
Immigrants who entered the country legally and became citizens are virtually ignored by the media. They champion instead illegal immigrants and the liberals who support them.
The reason for this disparity in attitude and coverage is that conservative blacks, women and Hispanics hold positions anathema to the left. Conservative African-Americans have been called all kinds of derogatory names in an effort to get them to convert to liberal orthodoxy, and they're ostracized if they don't convert. If conservative, a female is likely to be labeled a traitor to her gender, or worse.
Notice how the term "women's issues" is used by the media and certain politicians to suggest that there is only one acceptable position for females on any given topic. To the left, women's issues appear to mean abortion rights, same-sex marriage, higher taxes, bigger government and electing more women who favor such things.
When it comes to accomplished conservative female leaders, one of the greatest and smartest of our time was the late Jeane Kirkpatrick, Ronald Reagan's consequential U.S. ambassador to the United Nations. As Jay Nordlinger wrote in his review of Peter Collier's book "Political Woman" for National Review, "In a saner world, Jeane Kirkpatrick would have been lionized by feminists. She had risen from the oil patch to the commanding heights of U.S. foreign policy. But her views were 'wrong.'"
Collier writes that Kirkpatrick, who was a Democrat most of her life, recalled feminist icon Gloria Steinem once referring to her as "a female impersonator." Author Naomi Wolf called her "a woman without a uterus" and claimed that she had been "unaffected by the experiences of the female body." Kirkpatrick responded, "I have three kids, while she, when she made this comment had none."
The left gets away with these kinds of smears because they largely control the media and the message. No Republican could escape shunning, or worse, if such language were employed against a female Democrat.
Conservative columnist Michelle Malkin, born in Philadelphia to Philippine citizens, has written about some of the printable things she's been called -- "race traitor," "white man's puppet," "Tokyo Rose," "Aunt Tomasina."
As the cliche goes, if liberals didn't have a double standard, they would have no standards at all.
There's an old joke about a woman with five children who was asked if she had it to do over again would she have five kids. "Yes," she replied, "just not these five."
As the husband of a successful woman with a master's degree and accomplished daughters and granddaughters, that's how we feel about Hillary Clinton. We're all for a female president, just not this one.
Oct 22, 2016 | economistsview.typepad.com
Dani Rodrik:The Walloon mouse : ...Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements.
The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.
And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame.
One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.
El Chapo Guapo -> DrDick... October 22, 2016 at 11:22 AM , 2016 at 11:22 AM... ... ..The forgotten spirit of American protectionism : , -1
Trump would propose and/or enact, he listed the following six:
"A Constitutional Amendment to impose term limits on all members of Congress."
"A hiring freeze on all federal employees."
"A requirement that for every new federal regulation, 2 existing regulations must be eliminated."
"A 5-year ban on White House and Congressional officials becoming lobbyists after they leave government."
"A lifetime ban on White House officials lobbying on behalf of a foreign government."
"A complete ban on foreign lobbyists raising money for American elections."
Lot of reform is needed but may beThe free traders have human economic history precisely inverted. Countries that practice protectionism almost uniformly become wealthy and technologically advanced. Countries that don't become or remain terribly sad, poverty-stricken producers of worthless raw materials and desperate labor migrants. This has been true at least going back to Byzantium and its economic conquest by Genoa and Venice.
That the US thrived pre-1970 free trade is no coincidence. There is no alternative to protectionism. Free trade = no industry = no money = no future.
Oct 22, 2016 | www.bloomberg.comIn 2015, Forbes writer Adam Ozimek suggested that a "new liberal consensus" is forming in the economic-policy world. The data back him up. Many economics professors now tend to favor government intervention in the economy more than the general public. And the profession's biggest public stars, from Paul Krugman to Thomas Piketty to Joseph Stiglitz, are now more likely to lean to the left than to the right. Meanwhile, I've tried to document the flood of new research showing that policies like public housing , welfare and public education spending are more beneficial than conservatives have recognized in decades past.
But there are not one, but two big trends in liberal economic thinking. One wants to modify the economic thinking of the past few decades, and the other wants to rip it up. I expect to see a lot of the economic debate in the coming years play out not between the left and right, but between these two strains of thought.
The research and people I've been writing about fit into what we might call the New Center-Left Consensus. This strain of thought is based on data and empiricism. Support for higher minimum wages, for example, has grown among economists because a large amount of careful empirical analysis has shown that minimum wage hikes don't usually cause sizable immediate disruptions in local labor markets. These economists aren't ignorant of the basic theory of labor supply and demand -- the kind that every undergrad econ student is forced to learn. They just realize that it might not be the right theory in this case.
The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses to assume, as many conservatives and libertarians do, that free markets are always the best unless there is a glaring case for government intervention. It's more willing to entertain all kinds of ways that government can improve the economy, from welfare to infrastructure spending to regulation, but it also recognizes that these won't always work. It embraces a philosophy of careful experimentation. Sometimes the new center-left is even in favor of deregulation -- for example, loosening zoning restrictions and reducing occupational licensing . It's not ideologically opposed to the free market.
The best evangelist of the New Center-Left Consensus might be President Barack Obama. In an amazingly well-informed editorial in the Economist, he recently laid out a comprehensive picture of the economy and policy. I have little doubt that Obama's understanding was heavily informed by his chief economic adviser, Jason Furman , who has become a titan of center-left policy advocacy. Obama mixes a healthy respect for capitalism with a desire to use government to temper the market's excesses.
But there's a second strain of progressive economic thinking that is gaining attention and strength. This alternative could be called the New Heterodox Explosion. It's basically a movement to purge mainstream economics from progressive policy-making and thought.
The New Heterodox Explosion rose in large part out of strongly left-leaning intellectual circles, particularly sociology, the humanities and other disciplines outside economics. It has also found a home in some economics departments in other countries (most notably the U.K.). Recently, it has started to permeate blogs and the media.
The new website Evonomics , for example, is heavily devoted to strongly worded critiques of the entire edifice of modern [neoliberal] economics and it's where the work of many of the most outspoken champions of the New Heterodox Explosion appears. These include evolutionary biologist David Sloan Wilson, activist and venture capitalist Nick Hanauer, speechwriter Eric Liu and Eric Beinhocker of the Institute for New Economic Thinking. In a spate of recent blog posts and editorials, these thinkers have advocated replacing mainstream economic theory with thinking based on evolution, and/or on complexity theory.
Though it's difficult to boil down these critiques to a few sentences, one basic theme of Wilson, Hanauer, et al.'s thinking is that modern economics is based on selfishness. Mainstream theories model human beings as atomistic individuals pursuing their own wants. But, say these Evonomics writers, people are social beings who care a lot about their fellow humans, and are also deeply embedded in larger social structures and organizations like communities, nations and cultures.
I'm sympathetic to this point of view. I'm not at all sure that economies can be completely understood by looking at individual decisions, any more than I'm certain the growth of a tree can be understood simply by looking at the motions of the particles in the leaves and roots. And I do wish that economists dedicated a lot more thought and attention to the phenomena they call " externalities " and " social preferences ."
But I'm also very wary of applying the Evonomics ideas to policy-making without a lot more work. First, the connection to evolution and complexity theory often seems less than solid. Nobody really knows if economies evolve the way organisms do. And efforts to connect complexity theory to economics, led by the Santa Fe Institute , have been going on for quite some time without any dramatic breakthroughs.
So while the New Center-Left Consensus is fully formed and ready for application in the real world, the New Heterodox Explosion is still in its infancy. Center-left ideas have tons of very careful academic empirical work behind them, while those wishing to tear up economics and start over are still working mostly with broad analogies. I hope that the New Heterodox Explosion -- which of course extends far beyond the few writers and ideas I've cited in this post -- becomes a rich source of new and innovative economic ideas. But it still has a long way to go to match the intellectual heft of the center-left.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
Oct 22, 2016 | www.unz.com
I find the spectacle of liberals heroically mounting the barricades against Trump-fascism rather amusing.
For one thing, liberals don't crush fascism. Liberals appease fascism, then they exploit fascism. In between there's a great big war, where communists crush fascism. That's pretty much the lesson of WWII.
Second thing is, Trump isn't fascist. In my opinion, Trump's an old-fashioned white American nativist, which is pretty much indistinguishable from old-fashioned racist when considering the subjugation of native Americans and African-Americans and Asian immigrants, but requires that touch of "nativist" nuance when considering indigenous bigotry against Irish, Italian, and Jewish immigrants and citizens.
Tagging him as "fascist" allows his critics to put an alien, non-American gloss on a set of attitudes and policies that have been mainstreamed in American politics for at least 150 years and predate the formulation of fascism by several decades if not a century. Those nasty vetting/exclusion things he's proposing are as American as apple pie. For those interested in boning up on the Know Nothings and the Chinese Exclusion Act, I have this piece for you .
And for anybody who doesn't believe the US government does not already engage in intensive "extreme" vetting and targeting of all Muslims immigrants, especially those from targeted countries, not only to identify potential security risks but to groom potential intelligence assets, I got the Brooklyn Bridge to sell you right here:
Real fascism, in theory, is a rather interesting and nasty beast. In my opinion, it turns bolshevism on its head by using race or ethnic identity instead of class identity as the supreme, mobilizing force in national life.
In both fascism and bolshevism, democratic outcomes lack inherent legitimacy. National legitimacy resides in the party, which embodies the essence of a threatened race or class in a way that Hegel might appreciate but Marx probably wouldn't. Subversion of democracy and seizure of state power are not only permissible; they are imperatives.
The need to seize state power and hold it while a fascist or Bolshevik agenda is implemented dictates the need for a military force loyal to and subservient to the party and its leadership, not the state.
The purest fascism movement I know of exists in Ukraine. I wrote about it here , and it's a piece I think is well worth reading to understand what a political movement organized on fascist principles really looks like. And Trump ain't no fascist. He's a nativist running a rather incompetent campaign.
It's a little premature to throw dirt on the grave of the Trump candidacy, perhaps (I'll check back in on November 9), but it looks like he spent too much time glorying in the adulation of his white male nativist base and too little time, effort, and money trying to deliver a plausible message that would allow other demographics to shrug off the "deplorable" tag and vote for him. I don't blame/credit the media too much for burying Trump, a prejudice of mine perhaps. I blame Trump's inability to construct an effective phalanx of pro-Trump messengers, a failure that's probably rooted in the fact that Trump spent the primary and general campaign at war with the GOP establishment.
The only capital crime in politics is disunity, and the GOP and Trump are guilty on multiple counts.
The most interesting application of the "fascist" analysis, rather surprisingly, applies to the Clinton campaign, not the Trump campaign, when considering the cultivation of a nexus between big business and *ahem* racially inflected politics.
It should be remembered that fascism does not succeed in the real world as a crusade by race-obsessed lumpen . It succeeds when fascists are co-opted by capitalists, as was unambiguously the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives: socialism and communism.
That's because there is no more effective counter to class consciousness than race consciousness.
That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the United States. The contradictions between black and white labor formed a ready-made wedge. The North's abhorrence at the spread of slavery into the American West before the Civil War had more to do a desire to preserve these new realms for "free" labor-"free" in one context, from the competition of slave labor-than egalitarian principle.
White labor originally had legal recourse to beating back the challenge/threat of African-American labor instead of accommodating it as a "class" ally; it subsequently relied on institutional and customary advantages.
If anyone harbors illusions concerning the kumbaya solidarity between white and black labor in the post-World War II era, I think the article The Problem of Race in American Labor History by Herbert Hill ( a freebie on JSTOR ) is a good place to start.
The most reliable wedge against working class solidarity and a socialist narrative in American politics used to be white privilege which, when it was reliably backed by US business and political muscle, was a doctrine of de facto white supremacy.
However, in this campaign, the race wedge has cut the other way in a most interesting fashion. White conservatives are appalled, and minority liberals energized, by the fact that the white guy, despite winning the majority white male vote, lost to a black guy not once but twice, giving a White Twilight/Black Dawn (TM) vibe to the national debate.
The perception of marginalized white clout is reinforced by the nomination of Hillary Clinton and her campaign emphasis on the empowerment of previously marginalized but now demographically more important groups.
The Clinton campaign has been all about race and its doppelganger -actually, the overarching and more ear-friendly term that encompasses racial, ethnic, gender, and sexual loyalties-"identity politics."
The most calculated and systematic employment of racial politics was employed by the Hillary Clinton campaign in the Democratic primary to undercut the socialist-lite populist appeal of Bernie Sanders.
My personal disdain for the Clinton campaign was born on the day that John Lewis intoned "I never saw him" in order to dismiss the civil rights credentials of Bernie Sanders while announcing the Black Congressional Caucus endorsement of Hillary Clinton. Bear in mind that during the 1960s, Sanders had affiliated his student group at the University of Chicago with Lewis' SNCC, the Student Nonviolent Coordinating Committee; during the same era, Hillary Clinton was at Wellesley condemning "the snicks" for their excessively confrontational tactics.
To understand the significance of this event, one should read Fracture by the guru of woke Clintonism, Joy Reid. Or read my piece on the subject . Or simply understand that after Hillary Clinton lost Lewis's endorsement, the black vote, and the southern Democratic primaries to Barack Obama in 2008, and she was determined above all to secure and exploit monolithic black support in the primaries and, later on, the general in 2016.
So, in order to prevent Sanders from splitting the black vote to her disadvantage on ideological/class lines, Clinton played the race card. Or, as we put it today when discussing the championing of historically disadvantaged a.k.a. non white male heterosexual groups, celebrated "identity politics".
In the primary, this translated into an attack on Sanders and the apparently mythical "Bernie bro" as racist swine threatening the legacy of the first black president, venerated by the African American electorate, Barack Obama. In the general, well, Donald Trump and his supporters provided acres more genuine grist for the identity warrior mill.
Trump's populism draws its heat from American nativism, not "soak the rich" populism of the Sandernista stripe, and it was easily submerged in the "identity politics" narrative.
Trump's ambitions to gain traction for a favorable American/populist/outsider narrative for his campaign have been frustrated by determined efforts to frame him as anti-Semitic, racist against blacks and Hispanics, sexist, and bigoted against the disabled-and ready to hold the door while Pepe the Frog feeds his opponents, including a large contingent of conservative and liberal Jewish journalists subjected to unimaginable invective by the Alt-Right– into the ovens.
As an indication of the fungible & opportunistic character of the "identity politics" approach, as far as I can tell from a recent visit to a swing state, as the Clinton campaign pivoted to the general, the theme of Trump's anti-black racism has been retired in favor of pushing his offenses against women and the disabled. Perhaps this reflects the fact that Clinton has a well-advertised lock on the African-American vote and doesn't need to cater to it; also, racism being what it is, playing the black card is not the best way to lure Republicans and indies to the Clinton camp.
The high water mark of the Clinton African-American tilt was perhaps the abortive campaign to turn gun control into a referendum on the domination of Congress by white male conservatives. It happened a few months ago, so who remembers? But John Lewis led a sit-in occupation of the Senate floor in the wake of the Orlando shootings to highlight how America's future was being held hostage to the whims of Trump-inclined white pols.
That campaign pretty much went by the wayside (as did Black Lives Matter, a racial justice initiative partially funded by core Clinton backer George Soros; interesting, no?) as a) black nationalists started shooting policemen and b) Clinton kicked off a charm campaign to help wedge the black-wary GOP establishment away from Trump.
There is more to Clintonism, I think, than simply playing the "identity politics" card to screw Bernie Sanders or discombobulate the Trump campaign. "Identity politics" is near the core of the Clintonian agenda as a bulwark against any class/populist upheaval that might threaten her brand of billionaire-friendly liberalism.
In my view, a key tell is Clinton's enduring and grotesque loyalty to her family's charitable foundation, an operation that in my opinion has no place on the resume of a public servant, as a font of prestige, conduit for influence, and model for billionaire-backed global engagement.
By placing the focus of the campaign on identity politics and Trump's actual and putative crimes against various identity groups, the Clinton campaign has successfully obscured what I consider to be its fundamental identity as a vehicle for neoliberal globalists keen to preserve and employ the United States as a welcoming environment and supreme vehicle for supra-sovereign business interests.
Clintonism's core identity is not, in other words, as a crusade for groups suffering from the legacy and future threat of oppression by Trump's white male followers. It is a full-court press to keep the wheels on the neoliberal sh*twagon as it careens down the road of globalization, and it recognizes the importance in American democracy of slicing and dicing the electorate by identity politics and co-opting useful demographics as the key to maintaining power.
In my view, the Trump and Clinton campaigns are both protofascist.
Trump has cornered the somewhat less entitled and increasingly threatened white ethnic group, some of whom are poised to make the jump to white nationalism with or without him.
Clinton has cornered the increasingly entitled and assertive global billionaire group, which adores the class-busting anti-socialist identity-based politics she practices.
But the bottom line is race. U.S. racism has stacked up 400 years of tinder that might take a few hundred more years, if ever, to burn off. And until it does, every politician in the country is going to see his or her political future in flicking matches at it. And that's what we're seeing in the current campaign. A lot. Not fascism.
(Reprinted from China Matters by permission of author or representative)
Oct 21, 2016 | www.nakedcapitalism.comSpringTexasn October 21, 2016 at 10:45 amJeremy Grimm October 22, 2016 at 1:06 am
PlutoniumKun is 100% on-target. Moreover, non-universal benefits have tremendous overhead cost in terms of paperwork, qualifications, etc., while a universal benefit can be minimally bureaucratic.
I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation.
On the baby bonds, it's foolish to have a "$50 endowment for a child of Bill Gates". Instead it would be better to just provide $50,000 to ALL babies including Bill Gates' child, and tax Bill Gates more.
As the saying goes, "programs for the poor are poor programs." Bill Gates' child should be allowed to use the same public libraries, go to the same (free) public universities, etc. etc. I doubt Bill Gates' child will need to take up the guaranteed job, but if he needs or wants to (perhaps because of a quarrel with his parent) he should be able to.
And it prevents the constant attacks on recipients of benefits as being unworthy, criminal, drug-taking, undeserving folk who should be drug-tested, monitored, controlled, suspected.HotFlash October 22, 2016 at 6:38 am
Universality removes many of the privileges the rich enjoy - $50K for all babies including Bill Gates child - and as privileges are dismantled in this way the remaining privileges of the rich will stand all the more glaring for their unfairness - to all. Privileges like the selection of judges or the creation of special loopholes in the tax law, or other privileges only a political donation of the right amount might purchase. And it should be plain that some of the privileges described are not privileges at all but basic rights of human kind borne within any notion of the just.Stratos October 21, 2016 at 10:58 am
I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation.
I've been thinking about this bit a lot. When the BLM (I think) asked Bernie about reparations, he said he didn't think it was a good idea, that free college etc would help everyone.
I don't recall any elaboration on his part, but I wondered at the time, how would they be allocated? Full black, one-half black, one quarter, quadroon, octoroon, mulatto, 'yaller'? That's wholly back to Jim Crow, or worse. I refer, of course to the artificial division of Huttus and Tutsis which, you may recall, did not work out so well . Barack Obama, would he qualify? None of his ancestors were slaves.
I am looking forward to the book by Darity and Muller, but they would have to do a lot of persuading to get me to get comfy with reparations.
Oh, and re Yves' remark about the baby box, that would be Finland, there's a BBC article here , and one from the Atlantic, "Finland's 'Baby Box': Gift from Santa Claus or Socialist Hell?" America, jeesh!
The country that gives every expecting mother a new baby package is Finland. They started the practice in the 1930's when their infant mortality rate was at ten percent. Now they have one of the lowest infant mortality rates in the world.
Oct 22, 2016 | www.nakedcapitalism.com
Oct 22, 2016 | economistsview.typepad.com
anne : October 22, 2016 at 08:37 AM , 2016 at 08:37 AMhttp://cepr.net/blogs/beat-the-press/volcker-and-peterson-ignoring-the-lack-of-demand-problem
October 22, 2016
Volcker and Peterson: Ignoring the Lack of Demand Problem
Former Federal Reserve Board Chair Paul Volcker and private equity billionaire Peter Peterson had a New York Times column * this morning complaining that not enough attention is being paid to the national debt. The piece uses wrong-headed economics and xenophobia to try to scare readers into backing their austerity agenda.
On the economic side, it implies that the prospect of a rising debt to GDP ratio implies an imminent crisis.
"Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.
"Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war."
There are several points to be made here. First the ratio of debt service to GDP is currently just 0.8 percent. (This is net of interest payments rebated by the Federal Reserve Board.) This is near a post-war low. By comparison the ratio was over 3.0 percent in the early and mid-1990s. In other words, the reality is the exact opposite of what Volcker and Peterson claim, the burden of the debt on the economy is unusually low.
Second, if interest rates rise precipitously, which they imply will happen for unexplained reasons, we can always buy back the debt at large discounts, ** thereby reducing the debt to GDP ratio. This would be an absolutely pointless move, but if distinguished people who can get columns in the NYT think the debt to GDP ratio is important, it can be done to humor them.
Finally, the widely respected Congressional Budget Office (CBO) has repeatedly been wrong in predicting that interest rates will rise. (They also seriously over-estimated the cost of the Affordable Care Act and health care more generally.) Ever since 2010 CBO has projected that interest rates will bounce back to pre-recession levels. Each time they have been shown wrong as interest rates remained low. ***
The reason for the low rates is the weak level of demand in the economy. In this context, the deficit is a good thing and a bigger deficit would be better. It would generate more demand, output, and employment. It would also make us richer in the future since at higher levels of output firms invest more. Also, many workers who are out of the workforce for long periods of time can end up permanently unemployable.
As a result of the low deficits and weak demand in the post-recession years the widely respected Congressional Budget Office estimates that the economy's potential GDP in 2016 is almost 10 percent smaller **** (almost $2 trillion) than the potential it had projected for 2016 before the crash in 2008. This "austerity tax" is costing the country $6,200 per person in lost output. For some reason, Volcker and Peterson would have us ignore this huge and growing burden that the country now faces as a result of a sustained period of weak demand and instead concern ourselves with the improbable scenario they paint in their piece.
To push their Social Security and Medicare cutting agenda (they seem to have not noticed that the rate of growth of health care costs has slowed sharply) they then turn to Trumpian xenophobia:
"The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector's capacity to save, to finance industry and home purchases, and to invest abroad. Instead, we'd be dependent on foreign investors' acquiring most of our debt - making the government dependent on the 'kindness of strangers' who may not be so kind as the I.O.U.s mount up."
To make this evil foreigner case we have to turn economic reality on its head. First, the country's problem for the last decade and really for the whole century, has been a lack of demand, not the lack of supply which they are implying. While it might be nice to see the economy again operating near its potential and be supply constrained, it is not a situation we have seen for a long time.
Second, one of the reasons that we have a lack of demand is that foreigners, and most importantly foreign central banks, are buying our debt. (Yes, China is the biggest actor here, but not the only one.) The large purchases of U.S. government debt have driven up the value of the dollar causing the trade deficit to explode. It was around 1.0 of GDP in the mid-1990s. The run-up in the dollar following the East Asian financial crisis pushed the trade deficit to almost 4.0 percent of GDP by the end of 2000. It eventually peaked at almost 6.0 percent of GDP in 2005 and 2006.
Since the recession the trade deficit has fallen back to less than 3.0 percent of GDP (@ $500 billion in 2016), but this trade deficit is creating the gap in demand that is being in part filled by the budget deficit. If foreigners would show less of the "kindness of strangers" we would have a smaller trade deficit, more output, more jobs, and a smaller budget deficit.
In other words, Volcker and Peterson have the story upside down. We should not want foreigners to be buying our debt, at least if the goal is a lower budget deficit.
There is one last point that is worth mentioning. Japan's ratio of debt to GDP is close to 250 percent. Investors are currently paying the Japanese government to borrow their money. ***** In other words, the imminent debt crisis that Volcker and Peterson want to scare us with exists only in their heads.
-- Dean Baker
Oct 22, 2016 | www.nakedcapitalism.com
Oct 22, 2016 | www.nakedcapitalism.com
L October 21, 2016 at 3:48 pm
Shipping: "China is to build a deepwater tanker port in Malaysia off the Malacca Strait, a key gateway for Chinese oil imports.The $1.9bn port, located on the coast of Malacca City, will be able to accommodate very large crude carriers" [Lloyd's List].
But, if the point of the TPP is to hem in China by excluding them and bringing Malaysia into our "orbit" then why would they do this?
Unless, of course they know that any deal will make Malaysia a key gateway to the American market and thus allow them to use it to wash their goods through the TPP for cheap market access in the exact same way that they do it now via Mexico.
Oct 22, 2016 | economistsview.typepad.com
Peter K. : http://rodrik.typepad.com/dani_rodriks_weblog/2016/10/the-walloon-mouse.html
OCTOBER 22, 2016
The Walloon mouse
It appears Belgium's Wallonia has put a nail on the coffin of the EU-Canada trade agreement (CETA) by vetoing it. The reasons, The Economist puts it, "are hard to understand."
Well, yes and no. Canada is one of the most progressive trade partners you could hope to have, and it is hard to believe that Walloon incomes or values are really being threatened. But clearly something larger than the specifics of this agreement is at stake here.
Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements.
The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.
And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame.
One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.
Reply Saturday, October 22, 2016 at 09:32 AM Peter K. -> Peter K.... , -1http://www.economist.com/news/europe/21709060-tiny-region-belgium-opposes-trade-reasons-are-hard-understand-wallonia
Wallonia is adamantly blocking the EU's trade deal with Canada
"HEY Canada, f!@# you." Within hours this tweet (the result of a hack) from the Belgian foreign minister's account was replaced with a friendlier message: "keep calm and love Canada". Yet his country's actions are closer to the original. On October 14th the regional parliament of Wallonia voted to block the Comprehensive Economic and Trade Agreement (CETA), a trade deal between the European Union and Canada.
Oct 22, 2016 | economistsview.typepad.com
Simon Wren-Lewis:Neoliberalism and austerity : I like to treat neoliberalism not as some kind of coherent political philosophy, but more as a set of interconnected ideas that have become commonplace in much of our discourse. That the private sector entrepreneur is the wealth creator, and the state typically just gets in their way. That what is good for business is good for the economy, even when it increases monopoly power or involves rent seeking. Interference in business or the market, by governments or unions, is always bad. And so on. ...anne : , October 21, 2016 at 10:22 AM
I do not think austerity could have happened on the scale that it did without this dominance of this neoliberal ethos. Mark Blyth has described austerity as the biggest bait and switch in history. It took two forms. In one the financial crisis, caused by an under regulated financial sector lending too much, led to bank bailouts that increased public sector debt. This leads to an outcry about public debt, rather than the financial sector. In the other the financial crisis causes a deep recession which - as it always does - creates a large budget deficit. Spending like drunken sailors goes the cry, we must have austerity now.
In both cases the nature of what was going on was pretty obvious to anyone who bothered to find out the facts. That so few did so, which meant that the media largely went with the austerity narrative, can be partly explained by a neoliberal ethos. Having spent years seeing the big banks lauded as wealth creating titans, it was difficult for many to comprehend that their basic business model was fundamentally flawed and required a huge implicit state subsidy. On the other hand they found it much easier to imagine that past minor indiscretions by governments were the cause of a full blown debt crisis. ...
While in this sense austerity might have been a useful distraction from the problems with neoliberalism made clear by the financial crisis, I think a more important political motive was that it appeared to enable the more rapid accomplishment of a key neoliberal goal: shrinking the state. It is no coincidence that austerity typically involved cuts in spending rather than higher taxes... In that sense too austerity goes naturally with neoliberalism. ...
An interesting question is whether the same applies to right wing governments in the UK and US that used immigration/race as a tactic for winning power. We now know for sure, with both Brexit and Trump, how destructive and dangerous that tactic can be. As even the neoliberal fantasists who voted Leave are finding out, Brexit is a major setback for neoliberalism.
Not only is it directly bad for business, it involves (for both trade and migration) a large increase in bureaucratic interference in market processes. To the extent she wants to take us back to the 1950s, Theresa May's brand of conservatism may be very different from Margaret Thatcher's neoliberal philosophy.To the extent she wants to take us back * to the 1950s, Theresa May's brand of conservatism may be very different from Margaret Thatcher's neoliberal philosophy.anne said in reply to anne... , October 21, 2016 at 10:24 AM
* https://mainly macro.blogspot.co.uk/2016/09/the-uk-goes-back-to-1950s.html
-- Simon Wren-Lewis
[ When Teresa May became Prime Minister, I was puzzled for a time by the impression analysts were leaving that May was moderate or even liberal in looking to a less class-structured or focused Britain. The impression I had was that May would be comfortable with the British class structure of a century back, and meant to turn Britain socially as far back as possible. Possibly my impression was reasonable. ]https://mainly macro.blogspot.co.uk/2016/09/the-uk-goes-back-to-1950s.htmlDrDick : , October 21, 2016 at 11:20 AM
September 10, 2016
The UK goes back to the 1950s
The Brexit vote takes us back not to the 1970s when we joined, but back to the 1950s. Britain first tried to join the European Union in 1961, but was rebuffed by De Gaulle in 1963. Theresa May's call for the return of Grammar schools * (selection into different schools at the age of 11) also takes us back to the 1950s. One of the major achievements of the Labour government of the 1960s was to largely phase out selection at 11....
-- Simon Wren-LewisGood piece, but I think he misses the point here that much of the press coverage of these issues reflects the economic interests of the media companies and the highly paid journamalists. It also overlooks the concerted decades long attack of conservatives on the government.Peter K. : , -1Neoliberalism via Obama's Fed. Will Hillary's be any different?
http://macromarketmusings blogspot com/2016/10/has-macroeconomic-policy-been-different.html
Friday, October 21, 2016
Has Macroeconomic Policy Been Different Since the Crisis?
by David Beckworth
Brad DeLong wonders whether macroeconomic policy has been different in the post-2009 recovery. If we assume the role of macroeconomic policy is to stabilize aggregate demand growth, then my answer is an unequivocal yes. Macroeconomic policy was very different during the recovery than in previous periods.
It was different in two key ways. First, aggregate demand growth was kept below its pre-crisis trend growth rate. Since the recovery started in 2009Q3, NGDP growth has averaged 3.3 percent. This is well below the 5.4 percent of 1990-2007 period (blue line in the figure below) or a 5.7 percent for the entire Great Moderation period of 1985-2007. Any way you slice it, macroeconomic policy has dialed back the trend growth of nominal spending. This can be seen in the figure below.
Second, aggregate demand growth was not allowed to bounce back at a higher growth rate during the recovery like it has in past recessions. Put differently, macroeconomic policy in the past allowed aggregate demand to run a bit hot after a recession before settling it back down to its trend growth rate. This kept the growth path or level of NGDP stable. You can see this if the figure above by noting how the growth rate (black line) would typically go above the trend (blue line) temporarily after a recession.
Had macroeconomic policy allowed this NGDP growth to follow its typical bounce-back pattern after a recession, we would have seen something like the red line in the figure. This line is the dynamic forecast from a simple AR model based on the Great Moderation period. This naive forecast shows one would have expected NGDP growth to have reached as much as 8 percent during the recovery before settling back down. Instead we barely got over 3 percent growth.
So yes, macroeconomic policy has been different since the crisis. This policy choice, in my view, is a key reason whey the recovery was so anemic.
P.S. Speaking of NGDP growth, Ambrose Evans-Pritchard NGDP has a sobering piece in the Telegraph noting that nominal demand has been persistently falling since late 2014. This decline in nominal economic activity, in my view, is tied to the Fed's implicit tightening of monetary policy via the talking up of rate hikes since mid-2014.
Oct 22, 2016 | economistsview.typepad.comDenis Drew : October 21, 2016 at 01:47 PMCulture, culture, culture. We have to build an anti-neoliberal culture. How? Unions, unions, unions.likbez -> Denis Drew ...
Full scale re-unionization (I don't say "massive" which implies extraordinary -- what is extraordinary is 5% union density in private business; that's like 20/10 BP) will create a broad and deep consensus for (let's call it what it is) normal, grownup economics.
States can add to federal labor protections but not subtract (e.g., minimum wage). In the absence of actually working protection of organizing (not just organizers) states should feel free to impose certification elections where labor market warping is found.
Union busting should be a felony (taken at least as seriously as taking a movie in the movies ;-]) - but mandating elections could be the most direct remedy for union blocking.
Intimidating union organizing is illegal everywhere - and nowhere/nowhere practicably. If caught firing an organizer, then, at most you must rehire her. Doesn't matter if you fully compensate her income loss and never fire her again - you got away with the real bank robbery money; you barred the certification election.
Remedy that would make the clearest economic logic: a finding of union busting should lead to a mandatory certification election. Most would expect this sanction needs to take place at the federal level (NLRB preemption). This could be possible if Hillary pulls enough reps and senators with her. Perfect issue to attract Donald's AND BERNIE'S blue collar workers.
I believe this sanction could be done at the state level because the federal setup protects organizers (in theory if not so much in reality) but offers no protection for the act of organizING itself (except for categorizing it as illegal). If there is no DIRECT protection for organizing to preempt (not in any SUBSTANTIVE way), then I would argue that the states could mandate an election (upon the finding union blocking).
There may even be a tricky (as in convoluted) First Amendment argument: the federal setup cannot constitutionally void state protection of the First Amendment right to associate commercially by the imposition of a setup that provides no (as in zero) protection of it's own.likbez -> Denis Drew ... , October 21, 2016 at 09:39 PM
"...neoliberalism not as some kind of coherent political philosophy, but more as a set of interconnected ideas that have become commonplace in much of our discourse. "
Neoliberalism is an eclectic mix of ideas which like Marxism includes an economics doctrine (neoclassical economics) and some flavour of Nietzschean of philosophy ( Randism ).
Like Marxism postulates the coming dominance of proletariat as a new social class (via socialist transformation of the society), neoliberalism postulates the rule of global financial oligarchy as new dominant social class (disguised as "creative class" ). That's why sometimes it is called Trotskyism for rich.
In this sense it is somewhat different both from socialism and capitalism. On top level it is more like 'corporate socialism' as multinationals control the state, while on the lower level it is more like jungle capitalism ("greed is good", "homo homini lupus est", demonization of poor, decimation/privatization of Social programs, etc).
Or a mutation of corporatism (Italian model) with some elements of Falangism such as claim of the nonexistence of social classes and replacement of charismatic dictator and mass mobilization with inverted totalitarism.
The idea of "shrinking the state" is just a neoliberal propaganda trick. Under neoliberalism it is applicable only to vassal states to allow larger share of wealth to be grabbed by transnational corporations.
The USA as the center of global neoliberal empire needs constantly expanding state apparatus to deal with imperial governance, and, especially, military to deal with dissent and fight the wars of the expansion of neoliberal empire such as in Iraq, Libya and Syria. Just look at the Pentagon and State Department growth dynamics.
Also as the financial oligarchy is the ruling class and, as such, owns the government under the neoliberalism, any talk about possibility of not bailing out the banks is a little bit naive. As Senator Durbin observed:
=== quote ===
"And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place," he said on WJJG 1530 AM's "Mornings with Ray Hanania." Progress Illinois picked up the quote.
== end of quote ==
If most of Washington politicians including Obama and Clinton can be viewed as puppets of financial oligarchy, who exactly would revolt in Congress against the bailout? What social forces? Neocons? They are just neoliberals with the gun. Media-military-industrial complex ? They are well integrated with financial oligarchy via so called "deep state".
Squeezing the 99% was the only viable political option. Which in a decade produced the dramatic rise of social protest (aka "populism" as it is called by neoliberal presstitutes) that we now observe with Trump and Brexit.
But Brexit might be more of an exception then the rule: "one swallow does not a summer make".
Much depends on the rate of depletion of oil reserves which constitute the grave danger to neoliberal globalization.In other words an important stage of building anti-neoliberal culture is to understand what neoliberalism is, and what are avenues of social protest in the current conditions.
Re-creation of union power will be opposed with all available means (including neoliberal brainwashing) as the key idea of neoliberalism is an atomization of workforce. In other words each workers is an independent sellers of his "unit of labor" as a marketable good in "labor market" on the conditions dictated, of course, by the owners of the market.
As Margaret Thatcher said in 1987:
== quote ==
"I think we've been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant.' 'I'm homeless, the government must house me.' They're casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."
Oct 21, 2016 | www.bloomberg.com
As Europeans assess the fallout from the U.K.'s Brexit referendum , they face a series of elections that could equally shake the political establishment. In the coming 12 months, four of Europe's five largest economies have votes that will almost certainly mean serious gains for right-wing populists and nationalists. Once seen as fringe groups, France's National Front, Italy's Five Star Movement, and the Freedom Party in the Netherlands have attracted legions of followers by tapping discontent over immigration, terrorism, and feeble economic performance. "The Netherlands should again become a country of and for the Dutch people," says Evert Davelaar, a Freedom Party backer who says immigrants don't share "Western and Christian values."
... ... ....
The populists are deeply skeptical of European integration, and those in France and the Netherlands want to follow Britain's lead and quit the European Union. "Political risk in Europe is now far more significant than in the United States," says Ajay Rajadhyaksha, head of macro research at Barclays.
... ... ...
...the biggest risk of the nationalist groundswell: increasingly fragmented parliaments that will be unable or unwilling to tackle the problems hobbling their economies. True, populist leaders might not have enough clout to enact controversial measures such as the Dutch Freedom Party's call to close mosques and deport Muslims. And while the Brexit vote in June helped energize Eurosceptics, it's unlikely that any major European country will soon quit the EU, Morgan Stanley economists wrote in a recent report. But they added that "the protest parties promise to turn back the clock" on free-market reforms while leaving "sclerotic" labour and market regulations in place. France's National Front, for example, wants to temporarily renationalise banks and increase tariffs while embracing cumbersome labour rules widely blamed for chronic double-digit unemployment. Such policies could damp already weak euro zone growth, forecast by the International Monetary Fund to drop from 2 percent in 2015 to 1.5 percent in 2017. "Politics introduces a downside skew to growth," the economists said.
economistsview.typepad.comPeter K: October 21, 2016 at 10:14 AMI liked how Hillary said in the third debate that she was for raising the minimum wage because people who work full time shouldn't live in poverty. And "Donald" is against it. That's why people are voting for her.urban legend said...
That's an ethical or moral notion, combined with "morally neutral" economics. People who work hard full time, play by the rules and pay their dues shouldn't live in poverty.
Clinton says publically she believes that. Meanwhile supposedly smart economists like Tyler Cowen say they don't. Boston Fed President Rosengren says there are too many jobs. We need more unemployed. I'm Fed Up with regional Fed Presidents like him.
Think about the debate between the centrists and progressives over Trump supporters. The centrists argue Trump supporters (nor anyone else besides a few) aren't suffering from economic anxiety - that it's racism all of the way down. Matt Yglesias. Dylan Matthews. Krugman. Meyerson. Etc.
The progressives admit there's racism, but there's a wider context. The Nazis were racists, but there was also the Treaty of Versailles and the Great Depression. And Germany got better in the decades after the war just as the American South is better than it once was. Steve Randy Waldman and James Kwak discussed in blog post how the wider context should be taken into consideration.
On some "non-economic issues" there has been progress even though the recent decades haven't been as booming as the post-WWII decades were with rising living standards for all.
A black President. Legalized gay marriage. Legalized pot. I wouldn't have thought these things as likely to happen when I was a teenager because of the bigoted authoritarian nature of many voters and elites. During the Progressive era and when the New Deal was enacted, racism and sexism and bigotry and anti-science thinking was virulent. Yet economic progress was made on the class front.
Class issues are now a tough nut to crack, partly I think because the Democrats and some liberals take demands for economic fairness and try to give us identity politics instead, not that the latter isn't worthwhile. Partly b/c of what Mike Konczal discussed in his recent Medium piece.
If we can just apply the morality and politics of electing a black President and legalizing gay marriage and pot, to class issues. The meritocratic class who Krugman speaks for and centrist politicians like Clinton will slow-walk class issues like how Tim Geithner slow-walked financial reform. It's part of their job description and milieu.
But Clinton did talk to it during the third debate when she said she'd raise the minimum wage because people who work full time shouldn't live in poverty. That is a morale issue as the new Pope has been talking about.
Hillary should have joked last night about what God's Catholic representative here on Earth had to say about Trump.It's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is clearly the product of a free market -- exercising the right of free association and organizing to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any question wouldn't even occur to them -- for owners of capital to organize themselves under the special protections of the state-created corporation.
It's understandable, though, that they would consider the corporation to be ordained by natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and corporations are endowed with certain unalienable rights by their Creator. (Never mind that the creator of the corporations is the state.)
Oct 21, 2016 | economistsview.typepad.comurban legend : October 21, 2016 at 12:27 PMIt's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is clearly the product of a free market -- exercising the right of free association and organizing to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any question wouldn't even occur to them -- for owners of capital to organize themselves under the special protections of the state-created corporation.
It's understandable, though, that they would consider the corporation to be ordained by natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and corporations are endowed with certain unalienable rights by their Creator. (Never mind that the creator of the corporations is the state.)
JohnH :Robert Reich: "Hillary Clinton won't be the only winner when Donald Trump and his fellow haters are defeated on Election Day...Another will be Paul Ryan, who will rule the Republican roost...the ascendance of Ryan and Clinton will mark a win for big business and Wall Street."
Fortunately, the left will not roll over and play dead like they did during the Obama years...most likely to Krugman's dismay.
Jan 30, 2012 | www.wsws.org
... ... ...
This analysis has been vindicated by scholarly investigations into the causes of the Soviet economic collapse that facilitated the bureaucracy's dissolution of the USSR. In Russia Since 1980, published in 2008 by Cambridge University Press, Professors Steven Rosefielde and Stefan Hedlund present evidence that Gorbachev introduced measures that appear, in retrospect, to have been aimed at sabotaging the Soviet economy. "Gorbachev and his entourage," they write, "seem to have had a venal hidden agenda that caused things to get out of hand quickly." [p. 38] In a devastating appraisal of Gorbachev's policies, Rosefielde and Hedlund state:
History reveals that the grandsons of the Bolshevik coup d'état didn't destroy the Soviet Union in a valiant effort to advance the cause of communist prosperity or even to return to their common European home; instead, it transformed Soviet managers and ministers into roving bandits (asset-grabbing privateers) with a tacit presidential charter to privatize the people's assets and revenues to themselves under the new Muscovite rule of men. [p. 40]
Instead of displaying due diligence over personal use of state revenues, materials and property, inculcated in every Bolshevik since 1917, Gorbachev winked at a counterrevolution from below opening Pandora's Box. He allowed enterprises and others not only to profit maximize for the state in various ways, which was beneficial, but also to misappropriate state assets, and export the proceeds abroad. In the process, red directors disregarded state contracts and obligations, disorganizing inter-industrial intermediate input flows, and triggering a depression from which the Soviet Union never recovered and Russia has barely emerged. [p. 47]
Given all the heated debates that would later ensue about how Yeltsin and his shock therapy engendered mass plunder, it should be noted that the looting began under Gorbachev's watch. It was his malign neglect that transformed the rhetoric of Market Communism into the pillage of the nation's assets.
The scale of this plunder was astounding. It not only bankrupted the Soviet Union, forcing Russian President Boris Yeltsin to appeal to the G-7 for $6 billion of assistance on December 6, 1991, but triggered a free fall in aggregate production commencing in 1990, aptly known as catastroika.
In retrospect, the Soviet economy didn't collapse because the liberalized command economy devised after 1953 was marked for death. The system was inefficient, corrupt and reprehensible in a myriad of ways, but sustainable, as the CIA and most Sovietologists maintained. It was destroyed by Gorbachev's tolerance and complicity in allowing privateers to misappropriate state revenues, pilfer materials, spontaneously privatize, and hotwire their ill-gotten gains abroad, all of which disorganized production. [p. 49]
The analysis of Rosefielde and Hedlund, while accurate in its assessment of Gorbachev's actions, is simplistic. Gorbachev's policies can be understood only within the framework of more fundamental political and socioeconomic factors. First, and most important, the real objective crisis of the Soviet economy (which existed and preceded by many decades the accession of Gorbachev to power) developed out of the contradictions of the autarkic nationalist policies pursued by the Soviet regime since Stalin and Bukharin introduced the program of "socialism in one country" in 1924. The rapid growth and increasing complexity of the Soviet economy required access to the resources of the world economy. This access could be achieved only in one of two ways: either through the spread of socialist revolution into the advanced capitalist countries, or through the counterrevolutionary integration of the USSR into the economic structures of world capitalism.
For the Soviet bureaucracy, a parasitic social caste committed to the defense of its privileges and terrified of the working class, the revolutionary solution to the contradictions of the Soviet economy was absolutely unthinkable. The only course that it could contemplate was the second-capitulation to imperialism. This second course, moreover, opened for the leading sections of the bureaucracy the possibility of permanently securing their privileges and vastly expanding their wealth. The privileged caste would become a ruling class. The corruption of Gorbachev, Yeltsin and their associates was merely the necessary means employed by the bureaucracy to achieve this utterly reactionary and immensely destructive outcome.
On October 3, 1991, less than three months before the dissolution of the USSR, I delivered a lecture in Kiev in which I challenged the argument-which was widely propagated by the Stalinist regime-that the restoration of capitalism would bring immense benefits to the people. I stated:
In this country, capitalist restoration can only take place on the basis of the widespread destruction of the already existing productive forces and the social- cultural institutions that depended upon them. In other words, the integration of the USSR into the structure of the world capitalist economy on a capitalist basis means not the slow development of a backward national economy, but the rapid destruction of one which has sustained living conditions which are, at least for the working class, far closer to those that exist in the advanced countries than in the third world. When one examines the various schemes hatched by proponents of capitalist restoration, one cannot but conclude that they are no less ignorant than Stalin of the real workings of the world capitalist economy. And they are preparing the ground for a social tragedy that will eclipse that produced by the pragmatic and nationalistic policies of Stalin. ["Soviet Union at the Crossroads," published in The Fourth International (Fall- Winter 1992, Volume 19, No. 1, p. 109), Emphasis in the original.]
Almost exactly 20 years ago, on January 4, 1992, the Workers League held a party membership meeting in Detroit to consider the historical, political and social implications of the dissolution of the USSR. Rereading this report so many years later, I believe that it has stood the test of time. It stated that the dissolution of the USSR "represents the juridical liquidation of the workers' state and its replacement with regimes that are openly and unequivocally devoted to the destruction of the remnants of the national economy and the planning system that issued from the October Revolution. To define the CIS [Confederation of Independent States] or its independent republics as workers states would be to completely separate the definition from the concrete content which it expressed during the previous period." [David North, The End of the USSR, Labor Publications, 1992, p. 6]
The report continued:
"A revolutionary party must face reality and state what is. The Soviet working class has suffered a serious defeat. The bureaucracy has devoured the workers state before the working class was able to clean out the bureaucracy. This fact, however unpleasant, does not refute the perspective of the Fourth International. Since it was founded in 1938, our movement has repeatedly said that if the working class was not able to destroy this bureaucracy, then the Soviet Union would suffer a shipwreck. Trotsky did not call for political revolution as some sort of exaggerated response to this or that act of bureaucratic malfeasance. He said that a political revolution was necessary because only in that way could the Soviet Union, as a workers state, be defended against imperialism." [p. 6]
I sought to explain why the Soviet working class had failed to rise up in opposition to the bureaucracy's liquidation of the Soviet Union. How was it possible that the destruction of the Soviet Union-having survived the horrors of the Nazi invasion-could be carried out "by a miserable group of petty gangsters, acting in the interests of the scum of Soviet society?" I offered the following answer:
We must reply to these questions by stressing the implications of the massive destruction of revolutionary cadre carried out within the Soviet Union by the Stalinist regime. Virtually all the human representatives of the revolutionary tradition who consciously prepared and led that revolution were wiped out. And along with the political leaders of the revolution, the most creative representatives of the intelligentsia who had flourished in the early years of the Soviet state were also annihilated or terrorized into silence.
Furthermore, we must point to the deep-going alienation of the working class itself from state property. Property belonged to the state, but the state "belonged" to the bureaucracy, as Trotsky noted. The fundamental distinction between state property and bourgeois property-however important from a theoretical standpoint-became less and less relevant from a practical standpoint. It is true that capitalist exploitation did not exist in the scientific sense of the term, but that did not alter the fact that the day-to-day conditions of life in factories and mines and other workplaces were as miserable as are to be found in any of the advanced capitalist countries, and, in many cases, far worse.
Finally, we must consider the consequences of the protracted decay of the international socialist movement...
Especially during the past decade, the collapse of effective working class resistance in any part of the world to the bourgeois offensive had a demoralizing effect on Soviet workers. Capitalism assumed an aura of "invincibility," although this aura was merely the illusory reflection of the spinelessness of the labor bureaucracies all over the world, which have on every occasion betrayed the workers and capitulated to the bourgeoisie. What the Soviet workers saw was not the bitter resistance of sections of workers to the international offensive of capital, but defeats and their consequences. [p. 13-14]
The report related the destruction of the USSR by the ruling bureaucracy to a broader international phenomenon. The smashing up of the USSR was mirrored in the United States by the destruction of the trade unions as even partial instruments of working-class defense.
In every part of the world, including the advanced countries, the workers are discovering that their own parties and their own trade union organizations are engaged in the related task of systematically lowering and impoverishing the working class. [p. 22]
Finally, the report dismissed any notion that the dissolution of the USSR signified a new era of progressive capitalist development.
Millions of people are going to see imperialism for what it really is. The democratic mask is going to be torn off. The idea that imperialism is compatible with peace is going to be exposed. The very elements which drove masses into revolutionary struggle in the past are once again present. The workers of Russia and the Ukraine are going to be reminded why they made a revolution in the first place. The American workers are going to be reminded why they themselves in an earlier period engaged in the most massive struggles against the corporations. The workers of Europe are going to be reminded why their continent was the birthplace of socialism and Karl Marx. [p. 25]
The aftermath of the dissolution of the USSR: 20 years of economic crisis, social decay, and political reaction
According to liberal theory, the dissolution of the Soviet Union ought to have produced a new flowering of democracy. Of course, nothing of the sort occurred-not in the former USSR or, for that matter, in the United States. Moreover, the breakup of the Soviet Union-the so-called defeat of communism-was not followed by a triumphant resurgence of its irreconcilable enemies in the international workers' movement, the social democratic and reformist trade unions and political parties. The opposite occurred. All these organizations experienced, in the aftermath of the breakup of the USSR, a devastating and even terminal crisis. In the United States, the trade union movement-whose principal preoccupation during the entire Cold War had been the defeat of Communism-has all but collapsed. During the two decades that followed the collapse of the Soviet Union, the AFL-CIO lost a substantial portion of its membership, was reduced to a state of utter impotence, and ceased to exist as a workers' organization in any socially significant sense of the term. At the same time, everywhere in the world, the social position of the working class-from the standpoint of its influence on the direction of state policy and its ability to increase its share of the surplus value produced by its own labor-deteriorated dramatically.
Certain important conclusions flow from this fact. First, the breakup of the Soviet Union did not flow from the supposed failure of Marxism and socialism. If that had been the case, the anti-Marxist and antisocialist labor organizations should have thrived in the post-Soviet era. The fact that these organizations experienced ignominious failure compels one to uncover the common feature in the program and orientation of all the so-called labor organizations, "communist" and anticommunist alike. What was the common element in the political DNA of all these organization? The answer is that regardless of their names, conflicting political alignments and superficial ideological differences, the large labor organizations of the post-World War II period pursued essentially nationalist policies. They tied the fate of the working class to one or another nation-state. This left them incapable of responding to the increasing integration of the world economy. The emergence of transnational corporations and the associated phenomena of capitalist globalization shattered all labor organizations that based themselves on a nationalist program.
The second conclusion is that the improvement of conditions of the international working class was linked, to one degree or another, to the existence of the Soviet Union. Despite the treachery and crimes of the Stalinist bureaucracy, the existence of the USSR, a state that arose on the basis of a socialist revolution, imposed upon American and European imperialism certain political and social restraints that would otherwise have been unacceptable. The political environment of the past two decades-characterized by unrestrained imperialist militarism, the violations of international law, and the repudiation of essential principles of bourgeois democracy-is the direct outcome of the dissolution of the Soviet Union.
The breakup of the USSR was, for the great masses of its former citizens, an unmitigated disaster. Twenty years after the October Revolution, despite all the political crimes of the Stalinist regime, the new property relations established in the aftermath of the October Revolution made possible an extraordinary social transformation of backward Russia. And even after suffering horrifying losses during the four years of war with Nazi Germany, the Soviet Union experienced in the 20 years that followed the war a stupendous growth of its economy, which was accompanied by advances in science and culture that astonished the entire world.
But what is the verdict on the post-Soviet experience of the Russian people? First and foremost, the dissolution of the USSR set into motion a demographic catastrophe. Ten years after the breakup of the Soviet Union, the Russian population was shrinking at an annual rate of 750,000. Between 1983 and 2001, the number of annual births dropped by one half. 75 percent of pregnant women in Russia suffered some form of illness that endangered their unborn child. Only one quarter of infants were born healthy.
The overall health of the Russian people deteriorated dramatically after the restoration of capitalism. There was a staggering rise in alcoholism, heart disease, cancer and sexually transmitted diseases. All this occurred against the backdrop of a catastrophic breakdown of the economy of the former USSR and a dramatic rise in mass poverty.
As for democracy, the post-Soviet system was consolidated on the basis of mass murder. For more than 70 years, the Bolshevik regime's dissolution of the Constituent Assembly in January 1918-an event that did not entail the loss of a single life-was trumpeted as an unforgettable and unforgivable violation of democratic principles. But in October 1993, having lost a majority in the popularly elected parliament, the Yeltsin regime ordered the bombardment of the White House-the seat of the Russian parliament-located in the middle of Moscow. Estimates of the number of people who were killed in the military assault run as high as 2,000. On the basis of this carnage, the Yeltsin regime was effectively transformed into a dictatorship, based on the military and security forces. The regime of Putin-Medvedev continues along the same dictatorial lines. The assault on the White House was supported by the Clinton administration. Unlike the dissolution of the Constituent Assembly, the bombardment of the Russian parliament is an event that has been all but forgotten.
What is there to be said of post-Soviet Russian culture? As always, there are talented people who do their best to produce serious work. But the general picture is one of desolation. The words that have emerged from the breakup of the USSR and that define modern Russian culture, or what is left of it, are "mafia," "biznessman" and "oligarch."
What has occurred in Russia is only an extreme expression of a social and cultural breakdown that is to be observed in all capitalist countries. Can it even be said with certainty that the economic system devised in Russia is more corrupt that that which exists in Britain or the United States? The Russian oligarchs are probably cruder and more vulgar in the methods they employ. However, the argument could be plausibly made that their methods of plunder are less efficient than those employed by their counterparts in the summits of American finance. After all, the American financial oligarchs, whose speculative operations brought about the near-collapse of the US and global economy in the autumn of 2008, were able to orchestrate, within a matter of days, the transfer of the full burden of their losses to the public.
It is undoubtedly true that the dissolution of the USSR at the end of 1991 opened up endless opportunities for the use of American power-in the Balkans, the Middle East and Central Asia. But the eruption of American militarism was, in the final analysis, the expression of a more profound and historically significant tendency-the long-term decline of the economic position of American capitalism. This tendency was not reversed by the breakup of the USSR. The history of American capitalism during the past two decades has been one of decay. The brief episodes of economic growth have been based on reckless and unsustainable speculation. The Clinton boom of the 1990s was fueled by the "irrational exuberance" of Wall Street speculation, the so-called dot.com bubble. The great corporate icons of the decade-of which Enron was the shining symbol-were assigned staggering valuations on the basis of thoroughly criminal operations. It all collapsed in 2000-2001. The subsequent revival was fueled by frenzied speculation in housing. And, finally, the collapse in 2008, from which there has been no recovery.
When historians begin to recover from their intellectual stupor, they will see the collapse of the USSR and the protracted decline of American capitalism as interrelated episodes of a global crisis, arising from the inability to develop the massive productive forces developed by mankind on the basis of private ownership of the means of production and within the framework of the nation-state system.
So: Hillary Clinton has already said that she will raise Social Security taxes on people who make less than $118,500 per year, but Donald Trump has not indicated whether he will impose Social Security taxes on income above $118,500 per year.
Other proposals that have been pushed in order to "replenish the Social Security Trust Fund" - or to achieve the long-term stability of the Social Security system - mainly focus on three approaches:
One is privatizing Social Security, as Wall Street wants, and which proposal is based on private gambles that the assets that are purchased by the Wall Street firm for the individual investor will continually increase in value, never plunge, and never be reduced by annual charges to pay Wall Street's fees for management and for transactions, throughout the worker's career until retirement.
Another approach is gradually reducing the inflation-adjuster for benefits, the inflation-adjusted value of the benefits that Social Security recipients will be receiving. President Obama had been trying to get congressional Republicans to agree with him to do that (which some call "the boiling-frog approach" because it's applied so gradually), but they continued to hold out for privatizing Social Security, and thus nothing was done.
And the third option is to increase the retirement-age, as Obama also wanted to do (and which is really just another form of "boiling-frog approach"), but also couldn't get congressional Republicans to accept that. (Trump's comment to "Not increase the age and to leave it as it is" is a clear repudiation by him of this approach. And his promise to not increase taxes would, if taken seriously, also prohibit him from endorsing Hillary Clinton's approach.)
Investigative historian Eric Zuesse is the author, most recently, of They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST'S VENTRILOQUISTS: The Event that Created Christianity.
www.zerohedge.comSubmitted by Brandon Smith of Alt Market
The Essential Rules Of Tyranny
As we look back on the horrors of the dictatorships and autocracies of the past, one particular question consistently arises; how was it possible for the common men of these eras to NOT notice what was happening around them? How could they have stood as statues unaware or uncaring as their cultures were overrun by fascism, communism, collectivism, and elitism? Of course, we have the advantage of hindsight, and are able to research and examine the misdeeds of the past at our leisure. Unfortunately, such hindsight does not necessarily shield us from the long cast shadow of tyranny in our own day. For that, the increasingly uncommon gift of foresight is required…
At bottom, the success of despotic governments and Big Brother societies hinges upon a certain number of political, financial, and cultural developments. The first of which is an unwillingness in the general populace to secure and defend their own freedoms, making them completely reliant on corrupt establishment leadership. For totalitarianism to take hold, the masses must not only neglect the plight of their country, and the plight of others, but also be completely uninformed of the inherent indirect threats to their personal safety. They must abandon all responsibility for their destinies, and lose all respect for their own humanity. They must, indeed, become domesticated and mindless herd animals without regard for anything except their fleeting momentary desires for entertainment and short term survival. For a lumbering bloodthirsty behemoth to actually sneak up on you, you have to be pretty damnably oblivious.
The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process of centralization. Once dishonest governments accomplish an atmosphere of inaction and condition a sense of frailty within the citizenry, the sky is truly the limit. However, a murderous power-monger's day is never quite done. In my recent article 'The Essential Rules of Liberty' we explored the fundamentally unassailable actions and mental preparations required to ensure the continuance of a free society. In this article, let's examine the frequently wielded tools of tyrants in their invariably insane quests for total control…
Rule #1: Keep Them Afraid
People who are easily frightened are easily dominated. This is not just a law of political will, but a law of nature. Many wrongly assume that a tyrant's power comes purely from the application of force. In fact, despotic regimes that rely solely on extreme violence are often very unsuccessful, and easily overthrown. Brute strength is calculable. It can be analyzed, and thus, eventually confronted and defeated.
Thriving tyrants instead utilize not just harm, but the imminent THREAT of harm. They instill apprehension in the public; a fear of the unknown, or a fear of the possible consequences for standing against the state. They let our imaginations run wild until we see death around every corner, whether it's actually there or n