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Secular stagnation is a term proposed by Keynesian economist Alvin Hansen back in the 1930s to explain the USA dismal economic performance during this period. The period in which sluggish growth and output, and employment levels well below potential, coincide with a problematically low (even negative) real interest rates even in the face of the extraordinarily easy monetary policy. Later a similar phenomenon occurred in Japan. that's why it is often called called Japanification of the economy. Secular stagnation returned to the USA in full force after the financial crisis of 2008 (so called The Long Recession), so this is the second time the USA society experience the same socio-economic phenomenon.
Formally it can be defined as any stagnation that lasts substantially longer then the business cycle (and dominates the business cycle induced variations of economic activities), the suppression of economic performance for a long (aka secular) period. It also can be viewed as the crisis of demand, when demand became systemically weak (which under neoliberalism is ensured by redistribution of wealth up).
The global stagnation we are experiencing is the logical result of the dominance of neoliberalism and a sign of its crisis an a ideology. It is somewhat similar to the crisis of Bolshevik's ideology in the USSR in 60th when everybody realized that the existing society cannot fulfill the key promise of higher living standards. And that over centralization of economic life naturally leads to stagnation. The analogy does not ends here, but this point is the most important.
Neoliberalism replaced over-centralization (with iron fist one party rule) with over-financialization (with iron fist rule of financial oligarchy), with generally the same result as for the economy ( In other words neoliberalism like bolshevism is equal to economic stagnation; extremes meet). The end of cheap oil did not help iether. In a sense neoliberalism might be viewed as the elite reaction to the end of cheap oil, when it became clear that there are not enough cookies for everyone.
This growth in the financial sector's profits has not been an accident; it is the result of engineered shift in the elite thinking, which changed government policies. The central question of politics is, in my view, "Who has a right to live and who does not". In the answer to this question, neoliberal subscribes to Social Darwinism: ordinary citizens should be given much less rather than more social protection. Such policies would have been impossible in 50th and 60th (A Short History of Neo-liberalism)
In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today's standard neo-liberal toolkit, you would have been laughed off the stage at or sent off to the insane asylum. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist.
The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection--such ideas were utterly foreign to the spirit of the time. Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience.
And this change in government polices was achieved in classic Bolsheviks coup d'état way, when yoiu first create the Party of "professional neoliberal revolutionaries". Who then push for this change and "occupy" strategic places like economics departments at the universities, privately funded think tanks, MSM, and then subvert one or both major parties. The crisis of "New Deal Capitalism" helped, but without network of think tanks and rich donors, the triumph of neoliberalism in the USA would have been impossible:
...one explanation for this triumph of neo-liberalism and the economic, political, social and ecological disasters that go with it is that neo-liberals have bought and paid for their own vicious and regressive "Great Transformation". They have understood, as progressives have not, that ideas have consequences. Starting from a tiny embryo at the University of Chicago with the philosopher-economist Friedrich von Hayek and his students like Milton Friedman at its nucleus, the neo-liberals and their funders have created a huge international network of foundations, institutes, research centers, publications, scholars, writers and public relations hacks to develop, package and push their ideas and doctrine relentlessly.
Most economists are acutely aware of the increasing role in economic life of financial markets, institutions and operations and the pursuit of prifits via excotic instruments such as derivatives (all this constituted financialization). This dominant feature of neoliberalism has huge the re-distributional implications, huge effects on the US economy, international dimensions and monetary system, depth and longevity of financial crises and unapt policy responses to them.
They have built this highly efficient ideological cadre because they understand what the Italian Marxist thinker Antonio Gramsci was talking about when he developed the concept of cultural hegemony. If you can occupy peoples' heads, their hearts and their hands will follow.
I do not have time to give you details here, but believe me, the ideological and promotional work of the right has been absolutely brilliant. They have spent hundreds of millions of dollars, but the result has been worth every penny to them because they have made neo-liberalism seem as if it were the natural and normal condition of humankind. No matter how many disasters of all kinds the neo-liberal system has visibly created, no matter what financial crises it may engender, no matter how many losers and outcasts it may create, it is still made to seem inevitable, like an act of God, the only possible economic and social order available to us.
Neoliberalism naturally leads to secular stagnation due to redistribution of wealth up. which undermines purchasing power of the 99%, or more correctly 99.9 of the population. In the USA this topic became hotly debated theme in establishment circles after Summers speech in 2013. Unfortunately it was suppressed in Presidential campaign of 2016. Please note that Sanders speaks about Wall Street shenanigans, but not about ideology of neoliberalism. No candidates tried to address this problem of "self-colonization" of the USA, which is probably crucial to "making America great again" instead of continued slide into what is called "banana republic" coined by American writer O. Henry (William Sydney Porter 1862–1910). Here is how Wikipedia described the term:
Banana republic or banana state is a pejorative political science term for politically unstable countries in Latin America whose economies are largely dependent on exporting a limited-resource product, e.g. bananas. It typically has stratified social classes, including a large, impoverished working class and a ruling plutocracy of business, political, and military elites. This politico-economic oligarchy controls the primary-sector productions to exploit the country's economy.
... ... ...
In economics, a banana republic is a country operated as a commercial enterprise for private profit, effected by a collusion between the State and favoured monopolies, in which the profit derived from the private exploitation of public lands is private property, while the debts incurred thereby are a public responsibility.
This topic is of great importance to the US elite because the USA is the citadel of neoliberalism. It also suggest that the natural way neoliberal economic system based on increasing of the level of inequality (redistribution of wealth up) should behave: after the initial economic boom (like in case of steroids use) caused by financialization of economy (as well as dissolution of the USSR), helped by off-shoring of manufacturing, the destructive effects of this temporary boost come into foreground. Redistribution of wealth up increases inequality which after a certain delay starts to undercuts domestic demand. It also tilts the demand more toward conspicuous consumption (note the boom of luxury cars sales in the USA).
But after inequality reaches certain critical threshold the economy faces extended period of low growth reflecting persistently weak private demand (purchasing power of lower 90% of population). People who mostly have low level service economy jobs (aka MC-jobs) can't buy that much. Earlier giants of American capitalism like Ford understood that, but Wall Street sharks do not and does not want. They operate under principle "Après nous le déluge" ("After us, the deluge").
An economic cycle enters recession when total spending falls below expected by producers and they realize that production level is too high relative to demand. What we have under neoliberalism is Marx's crisis of overproduction on a new level. At this level it is intrinsically connected with the parasitic nature of complete financialization of the economy. The focus on monetary policy and the failure to enact fiscal policy options is the key structural defect of neoliberalism ideology and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hits the USA. That might not happen soon. Bolshevism lasted more then 70 years. If we assume that the "age of neoliberalism" started at 1973 with Pinochet coup d'état in Chile, neoliberalism as a social system is just 43 years old (as of 2016). It still has some "time to live"(TTL) in zombies state due to the principle first formulated by Margaret Thatcher as TINA ("There Is No Alternative") -- the main competitor, bolshevism, was discredited by the collapse of the USSR and China leadership adoption of neoliberalism. While Soviet leadership simply abandoned the sinking ship and became Nouveau riche in a neoliberal society that followed, Chinese elite managed to preserved at least outer framework of the Marxist state and the political control of the Communist party (not clear for how long). But there was a neoliberal transformation of Chinese economy, initiated, paradoxically, by the Chinese Communist Party.
Currently, no other ideology, including old "New Deal" ideology can compete with neoliberal ideology, although things started to change with Sanders campaign in the USA on the left and Trump campaign on the right. Most of what we see as a negative reaction to neoliberalism in Europe generally falls into the domain of cultural nationalism.
The 2008 financial crisis, while discrediting neoliberalism as an ideology (in the same way as WWII discredited Bolshevism), was clearly not enough for the abandonment of this ideology. Actually neoliberalism proved to be remarkably resilient after this crisis. Some researchers claim that it entered "zombie state" and became more bloodthirsty and ruthless.
There is also religious overtones of neoliberalism which increase its longevity (similar to Trotskyism, and neoliberalism can be called "Trotskyism for rich"). So, from a small, unpopular sect with virtually no influence, neo-liberalism has become the major world religion with its dogmatic doctrine, its priesthood, its law-giving institutions and perhaps most important of all, its hell for heathen and sinners who dare to contest the revealed truth. Like in most cults adherents became more fanatical believers after the prophecy did not materialized. The USA elite tried partially alleviate this problem by resorting to military Keynesianism as a supplementary strategy. But while military budget was raised to unprecedented levels, it can't reverse the tendency. Persistent high output gap is now a feature of the US economy, not a transitory state.
But there is another factor in play here: combination of peak (aka "plato" ;-) oil and established correlation of the speed of economic growth and prices on fossil fuels and first of all on oil. Oil provides more than a third of the energy we use on the planet every day, more than any other energy source (How High Oil Prices Will Permanently Cap Economic Growth - Bloomberg). It is dominant fuel for transport and in this role it is very difficult to replace.
That means that a substantial increase of price of oil acts as a fundamental limiting factor for economic growth. And "end of cheap oil" simply means that any increase of supply of oil to support growing population on the planet and economic growth now requires higher prices. Which naturally undermine economic growth, unless massive injection of currency are instituted. that probably was the factor that prevented slide of the US economy into the recession in 2009-2012. Such a Catch-22.
Growth dampening potential of over $100-a-barrel oil is now a well established factor. Unfortunately, the reverse is not true. Drop of oil price to below $50 as happened in late 2014 and first half of 2015 did not increase growth rate of the USA economy. It might simply prevented it from sliding it into another phase of Great Recession. Moreover when economies activity drops, less oil is needed. Enter permanent stagnation.
Also there is not much oil left that can be profitably extracted at prices below $80. So the current oil price slump is a temporary phenomenon, whether it was engineered, or is a mixture of factors including temporary overcapacity . Sooner or later oil prices should return to level "above $80", as only at this level of oil price capital expenditures in new production make sense. That des not mean that oil prices can't be suppressed for another year or even two, but as Herbert Stein aptly noted "If something cannot go on forever, it will stop,"
Imagine the alien spaceship landed somewhere in the world. There would be denial, disbelief, fear, and great uncertainty for the future. World leaders would struggle to make sense of the events. The landing would change everything.
The secular stagnation (aka "end of permanent growth") is a very similar event. This also is the event that has potential to change everything, but it is much more prolonged in time and due to this less visible ("boiling frog effect"). Also this is not a single event, but a long sequence of related events that probably might last several decades (as Japan had shown) or even centuries. The current "Great Recession" might be just a prolog to those events. It is clearly incompatible with capitalism as a mode of production, although capitalism as a social system demonstrated over the years tremendous adaptability and it is too early to write it down completely. Also no clear alternatives exists.
A very slow recovery and the secular stagnation is characteristic of economies suffering from a balance-sheet recession (aka crisis of overproduction), as forcefully argued by Nomura’s Richard Koo and other economists. The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further.
|The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further.|
There are at least five different hypothesis about the roots of secular stagnation:
Summers’s remarks and articles were followed by an explosion of debate concerning “secular stagnation”—a term commonly associated with Alvin Hansen’s work from the 1930s to ’50s, and frequently employed in Monthly Review to explain developments in the advanced economies from the 1970s to the early 2000s.2 Secular stagnation can be defined as the tendency to long-term (or secular) stagnation in the private accumulation process of the capitalist economy, manifested in rising unemployment and excess capacity and a slowdown in overall economic growth. It is often referred to simply as “stagnation.” There are numerous theories of secular stagnation but most mainstream theories hearken back to Hansen, who was Keynes’s leading early follower in the United States, and who derived the idea from various suggestions in Keynes’s General Theory of Employment, Interest and Money (1936).
Responses to Summers have been all over the map, reflecting both the fact that the capitalist economy has been slowing down, and the role in denying it by many of those seeking to legitimate the system. Stanford economist John B. Taylor contributed a stalwart denial of secular stagnation in the Wall Street Journal. In contrast, Paul Krugman, who is closely aligned with Summers, endorsed secular stagnation on several occasions in the New York Times. Other notable economists such as Brad DeLong and Michael Spence soon weighed in with their own views.3
Three prominent economists have new books directly addressing the phenomena of secular stagnation.4 It has now been formally modelled by Brown University economists Gauti Eggertsson and Neil Mehrotra, while Thomas Piketty’s high-profile book bases its theoretical argument and policy recommendations on stagnation tendencies of capitalism. This explosion of interest in the Summers/Krugman version of stagnation has also resulted in a collection of articles and debate, edited by Coen Teulings and Richard Baldwin, entitled Secular Stagnation: Facts, Causes and Cures.5
Seven years after “The Great Financial Crisis” of 2007–2008, the recovery remains sluggish. It can be argued that the length and depth of the Great Financial Crisis is a rather ordinary cyclical crisis. However, the monetary and fiscal measures to combat it were extraordinary. This has resulted in a widespread sense that there will not be a return to “normal.” Summers/Krugman’s resurrection within the mainstream of Hansen’s concept of secular stagnation is an attempt to explain how extraordinary policy measures following the 2007–2008 crisis merely led to the stabilization of a lethargic, if not comatose, economy.
But what do these economists mean by secular stagnation? If stagnation is a reality, does their conception of it make current policy tools obsolete? And what is the relationship between the Summers/Krugman notion of secular stagnation and the monopoly-finance capital theory?
... ... ...
In “secular stagnation,” the term “secular” is intended to differentiate between the normal business cycle and long-term, chronic stagnation. A long-term slowdown in the economy over decades can be seen as superimposed on the regular business cycle, reflecting the trend rather than the cycle.
In the general language of economics, secular stagnation, or simply stagnation, thus implies that the long-run potential economic growth has fallen, constituting the first pillar of MISS. This has been most forcefully argued for by Robert Gordon, as well as Garry Kasparov and Peter Thiel.6 Their argument is that the cumulative growth effect of current (and future) technological changes will be far weaker than in the past. Moreover, demographic changes place limits on the development of “human capital.” The focus is on technology, which orthodox economics generally sees as a factor external to the economy and on the supply-side (i.e., in relation to cost). Gordon’s position is thus different than that of moderate Keynesians like Summers and Krugman, who focus on demand-side contradictions of the system.
In Gordon’s supply-side, technocratic view, there are forces at work that will limit the growth in productive input and the efficiency of these inputs. This pillar of MISS emphasizes that it is constraints on the aggregate supply-side of the economy that have diminished absolutely the long-run potential growth.
The second pillar of MISS, also a supply-side view, goes back at least to Joseph Schumpeter. To explain the massive slump of 1937, Schumpeter maintained there had emerged a growing anti-business climate. Moreover, he contended that the rise of the modern corporation had displaced the role of the entrepreneur; the anti-business spirit had a repressive effect on entrepreneurs’ confidence and optimism.7 Today, this second pillar of MISS has been resurrected suggestively by John B. Taylor, who argues the poor recovery is best “explained by policy uncertainty” and “increased regulation” that is unfavorable to business. Likewise, Baker, Bloom, and Davis have forcefully argued that political uncertainty can hold back private investment and economic growth.8
Summers and Krugman, as Keynesians, emphasize a third MISS pillar, derived from Keynes’s famous liquidity trap theory, which contends that the “full-employment real interest rate” has declined in recent years. Indeed, both Summers and Krugman demonstrate that real interest rates have declined over recent decades, therefore moving from an exogenous explanation (as in pillars one and two) to a more endogenous explanation of secular stagnation.9 The ultimate problem here is lack of investment demand, such that, in order for net investment to occur at all, interest rates have to be driven to near zero or below. Their strong argument is that there are now times when negative real interest rates are needed to equate saving and investment with full employment.
However, “interest rates are not fully flexible in modern economies”—in other words, market-determined interest rate adjustments chronically fail to achieve full employment. Summers contends there are financial forces that prohibit the real interest rate from becoming negative; hence, full employment cannot be realized.10
Some theorists contend that there has been demographic structural shifts increasing the supply of saving, thus decreasing interest rates. These shifts include an increase in life expectancy, a decrease in retirement age, and a decline in the growth rate of population.
Others, including Summers, point out that stagnation in capital formation (or accumulation) can be attributed to a decrease in the demand for loanable funds for investment. One mainstream explanation offered for this is that today’s new technologies and companies, such as Google, Microsoft, Amazon, and Facebook, require far less capital investment. Another hypothesis is that there has been an important decrease in the demand for loanable funds, although they argue this is due to a preference for safe assets. These factors can function together to keep the real interest rate very low. The policy implication of secular low interest rates is that monetary policy is more difficult to implement effectually; during a recession, it is weakened and can even become ineffectual.
Edward Glaeser, focusing on “secular joblessness,” places severe doubt on the first pillar of MISS, but then makes a very important additional argument. Glaeser rejects the notion that there has been a slowdown in technological innovation; innovation is simply “unrelenting.” Likewise, he is far less concerned with secular low real interest rates, which may be far more cyclical. “Therefore,” contends Glaeser, “stagnation is likely to be temporary.”
Nonetheless, Glaeser underscores secular joblessness, and thus the dysfunction of U.S. labor markets constitutes a fourth pillar of MISS: “The dysfunction in the labour market is real and serious, and seems unlikely to be solved by any obvious economic trend.” Somehow, then, the problem is due to a misfit of skills or “human capital” on the side of workers, who thus need retraining. “The massive secular trend in joblessness is a terrible social problem for the US, and one that the country must try to address” with targeted policy.11 Glaeser’s argument for the dysfunction of U.S. labor markets is based on recession-generated shocks to employment, specifically of less-skilled U.S. workers. After 1970, when workers lost their job, the damage to human capital became permanent. In short, when human capital depreciates due to unemployment, overall abilities and “talent” are “lost” permanently. This may be because the skills required in today’s economy need to be constantly practiced to be retained. Thus, there is a ratchet-like effect in joblessness caused by recessions, whereby recession-linked joblessness is not fully reversed during recoveries—and all this is related to skills (the human capital of the workers), and not to capital itself. According to Glaeser, the ratchet-like effect of recession-linked joblessness is further exacerbated by the U.S. social-safety net, which has “made joblessness less painful and increased the incentives to stay out of work.”12
Glaeser contends that, if his secular joblessness argument is correct, the macroeconomic fiscal interventions argued for by Summers and Krugman are off-base.13 Instead, the safety net should be redesigned in order to encourage rather than discourage people from working. Additionally, incentives to work need to be radically improved through targeted investments in education and workforce training.14 Such views within the mainstream debate, emphasizing exogenous factors, are generally promoted by freshwater (conservative) rather than saltwater (liberal) economists. Thus, they tend to emphasize supply-side or cost factors.
The fifth pillar of MISS contends that output and productivity growth are stagnant due to a failure to invest in infrastructure, education, and training. Nearly all versions of MISS subscribe to some version of this, although there are both conservative and liberal variations. Barry Eichengreen underscores this pillar and condemns recent U.S. fiscal developments that have “cut to the bone” federal government spending devoted to infrastructure, education, and training.
The fifth pillar of MISS necessarily reflects an imbalance between public and private investment spending. Many theorists maintain that the imbalance between public and private investment spending, hence secular stagnation, “is not inevitable.” For example, Eichengreen contends if “the US experiences secular stagnation, the condition will be self-inflicted. It will reflect the country’s failure to address its infrastructure, education and training needs. It will reflect its failure to…support aggregate demand in an effort to bring the long-term unemployed back into the labour market.”15
The sixth pillar of MISS argues that the “debt overhang” from the overleveraging of financial firms and households, as well as private and public indebtedness, are a serious drag on the economy. This position has been argued for most forcefully by several colleagues of Summers at Harvard, most notably Carmen Reinhart and Kenneth Rogoff.16 Atif Mian and Amir Sufi also argue that household indebtedness was the primary culprit causing the economic collapse of 2007–2008. Their policy recommendation is that the risk to mortgage borrowers must be reduced to avoid future calamities.17
As noted, the defenders of MISS do not necessarily support a compatibility between the above six pillars: those favored by conservatives are supply-side and exogenous in emphasis, while liberals tend towards demand-side and endogenous ones. Instead, most often these pillars are developed as competing theories to explain the warrant of some aspect of secular stagnation, and/or to defend particular policy positions while criticizing alternative policy positions. However, the concern here is not whether there is the possibility for a synthesis of mainstream views. Rather, the emphasis is on how partial and separate such explanations are, both individually and in combination.
As Krugman said "We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate." In other words blowing bubbles is the fundamental way neoliberal economy functions, not an anomaly.
As much as the USA population is accustomed to hypocrisy of the ruling elite and is brainwashed by MSM, this news, delivered to them personally by the crisis of 2008 was too much for them not question the fundamentals (A Primer on Neoliberalism):
Of course, the irony that those same institutions would now themselves agree that those “anti-capitalist” regulations are required is of course barely noted. Such options now being considered are not anti-capitalist. However, they could be described as more regulatory or managed rather than completely free or laissez faire capitalism, which critics of regulation have often preferred.
But a regulatory capitalist economy is very different to a state-based command economy, the style of which the Soviet Union was known for. The points is that there are various forms of capitalism, not just the black-and-white capitalism and communism. And at the same time, the most extreme forms of capitalism can also lead to the bigger bubbles and the bigger busts.
In that context, the financial crisis, as severe as it was, led to key architects of the system admitting to flaws in key aspects of the ideology.
At the end of 2008, Alan Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Federal Reserve had been long and lauded, and Congress wanted to know what had gone wrong. Henry Waxman questioned him:
I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
In other words, you found that your view of the world, your ideology, was not right, it was not working.
Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
[Greenspan’s flaw] warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president’s senior economic advisor, has had to come to terms with a similar error—his view that the market was inherently self-stabilizing has been “dealt a fatal blow.” Hank Paulson, Bush’s treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC’s Mad Money admitted defeat: “The only guy who really called this right was Karl Marx.” One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.
— Raj Patel, Flaw , The Value of Nothing, (Picador, 2010), pp.4, 6-7
Now for the second time in history, the challenge is to save capitalism from itself: to recognize the great strengths of open, competitive markets while rejecting the extreme capitalism and unrestrained greed that have perverted so much of the global financial system in recent times. It took such a statesman as Franklin Delano Roosevelt to rebuild American capitalism after the Great Depression. New Deal policies allowed to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement.
With the abolishment of those policies blowing of one bubble after another, each followed by a financial crisis became standard chain of the events. Since 1973 we already have a half-dozen bubbles following by economic crisis. It started with Savings and loan crisis which partially was caused by the deregulation of S&Ls in 1980, by the Depository Institutions Deregulation and Monetary Control Act signed by President Jimmy Carter on March 31, 1980, an important step is a series that eliminated regulations initially designed to prevent lending excesses and minimize failures.
To hide this unpleasant fact neoliberals resort to so called the Great Neoliberal Lie:
What is neoliberalism
The fallacious and utterly misleading argument that the global economic crisis (credit crunch) was caused by excessive state spending, rather than by the reckless gambling of the deregulated, neoliberalized financial sector.
Just as with other pseudo-scientific theories and fundamentalist ideologies, the excuse that "we just weren't fundamentalist enough last time" is always there. The neoliberal pushers of the establishment know that pure free-market economies are as much of an absurd fairytale as 100% pure communist economies, however they keep pushing for further privatizations, tax cuts for the rich, wage repression for the ordinary, and reckless financial sector deregulations precisely because they are the direct beneficiaries of these policies. Take the constantly widening wealth gap in the UK throughout three decades of neoliberal policy. The minority of beneficiaries from this ever widening wealth gap are the business classes, financial sector workers, the mainstream media elite and the political classes. It is no wonder at all that these people think neoliberalism is a successful ideology. Within their bubbles of wealth and privilege it has been. To everyone else it has been an absolute disaster.
Returning to a point I raised earlier in the article; one of the main problems with the concept of "neoliberalism" is the nebulousness of the definition. It is like a form of libertarianism, however it completely neglects the fundamental libertarian idea of non-aggression. In fact, it is so closely related to that other (highly aggressive) US born political ideology of Neo-Conservatism that many people get the two concepts muddled up. A true libertarian would never approve of vast taxpayer funded military budgets, the waging of imperialist wars of aggression nor the wanton destruction of the environment in pursuit of profit.
Another concept that is closely related to neoliberalism is the ideology of minarchism (small stateism), however the neoliberal brigade seem perfectly happy to ignore the small-state ideology when it suits their personal interests. Take the vast banker bailouts (the biggest state subsidies in human history) that were needed to save the neoliberalised global financial sector from the consequences of their own reckless gambling, the exponential growth of the parasitic corporate outsourcing sector (corporations that make virtually 100% of their turnover from the state) and the ludicrous housing subsidies (such as "Help to Buy and Housing Benefits) that have fueled the reinflation of yet another property Ponzi bubble.
The Godfather of neoliberalism was Milton Friedman. He made the case that illegal drugs should be legalised in order to create a free-market drug trade, which is one of the very few things I agreed with him about. However this is politically inconvenient (because the illegal drug market is a vital source of financial sector liquidity) so unlike so many of his neoliberal ideas that have consistently failed, yet remain incredibly popular with the wealthy elite, Friedman's libertarian drug legalisation proposals have never even been tried out.
The fact that neoliberals are so often prepared to ignore the fundamental principles of libertarianism (the non-aggression principle, drug legalisation, individual freedoms, the right to peaceful protest ...) and abuse the fundamental principles of small state minarchism (vast taxpayer funded bailouts for their financial sector friends, £billions in taxpayer funded outsourcing contracts, alcohol price fixing schemes) demonstrate that neoliberalism is actually more like Ayn Rand's barmy (greed is the only virtue, all other "virtues" are aberrations) pseudo-philosophical ideology of objectivism than a set of formal economic theories.
The result of neoliberal economic theories has been proven time and again. Countries that embrace the neoliberal pseudo-economic ideology end up with "crony capitalism", where the poor and ordinary suffer "austerity", wage repression, revocation of labor rights and the right to protest, whilst a tiny cabal of corporate interests and establishment insiders enrich themselves via anti-competitive practices, outright criminality and corruption and vast socialism-for-the-rich schemes.
Neoliberal fanatics in powerful positions have demonstrated time and again that they will willingly ditch their right-wing libertarian and minarchist "principles" if those principles happen to conflict with their own personal self-interest. Neoliberalism is less of a formal set of economic theories than an error strewn obfuscation narrative to promote the economic interests, and justify the personal greed of the wealthy, self-serving establishment elite.
The 1930s, a well researched period of balance-sheet recession, provides some interesting perspective despite large historical distance. Roosevelt was no socialist, but his New Deal did frighten many businesses, especially large business which BTW attempted a coupe to remove him from is position. Fortunately for Roosevelt CIA did not exist yet. And New Deal government projects has been much bigger and bolder, then anything Obama ever tried, because Obama administration was constrained in its action by dominant neoliberal thinking. Like regulatory capture, which is an immanent feature of neoliberalism, there is also less known and less visible ideological capture of the government. Which also makes neoliberalism more similar to bolshevism as this ideological capture and related inability of the USSR elite to modernize the economy on some "mixed" principles, when over-centralization stopped working. It, along with the collapse of the ideology, probably was one of the main reasons of the collapse of the USSR. Chinese leadership managed to do this and introduced "new economic policies"(NEP).
Uner New deal regime when public investment and hence aggregate demand expanded, the economy started to grow anyway. Roosevelt did have a vision and he did convince the electorate about the way to go. Cheap optimism of Reagan, or even audacity of hope "Obama style" were not enough. After all, as Francis Bacon may remind us: “Hope is a good breakfast, but it is a bad supper” (Apophthegms, 1624).
Obama/Bernanke-style attempts to stimulate growth by pure injection of cheap money in this environment not only inflate new bubbles instead of old one, with which the fighting starts. They also lead to massive redistribution of wealth that makes the problem even worse:
Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers' remarks.
First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn't follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
Larry Summers was the first establishment economist who conceded that this is the fact (Wikipedia)
... Larry Summers presented his view during November 2013 that secular (long-term) stagnation may be a reason that U.S. growth is insufficient to reach full employment: "Suppose then that the short term real interest rate that was consistent with full employment [i.e., the "natural rate"] had fallen to negative two or negative three percent. Even with artificial stimulus to demand you wouldn't see any excess demand. Even with a resumption in normal credit conditions you would have a lot of difficulty getting back to full employment."
Robert J. Gordon wrote in August 2012:
"Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative 'exercise in subtraction' suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades".
One hypothesis is that high levels of productivity greater than the economic growth rate are creating economic slack, in which fewer workers are required to meet the demand for goods and services. Firms have less incentive to invest and instead prefer to hold cash. Journalist Marco Nappolini wrote in November 2013:
"If the expected return on investment over the short term is presumed to be lower than the cost of holding cash then even pushing interest rates to zero will have little effect. That is, if you cannot push real interest rates below the so-called short run natural rate [i.e., the rate of interest required to achieve the growth rate necessary to achieve full employment] you will struggle to bring forward future consumption, blunting the short run effectiveness of monetary policy...Moreover, if you fail to bring it below the long run natural rate there is a strong disincentive to increase fixed capital investment and a consequent preference to hold cash or cash-like instruments in an attempt to mitigate risk. This could cause longer-term hysteresis effects and reduce an economy's potential output."
The cost of energy is probably another reason of secular stagnation along with excessive public and private debt. Rising cost of energy is deadly for capitalism. Here are some comments that might clarify the situation:
This is the biggest crybaby column Krugman's ever written. He should be ashamed of himself and return his Nobel prize immediately. Has he ever put down Keynes long enough to read a little Marx? Here's Robert Brenner summing it up in 2009:
What mainly accounts for the long-term weakening of the real economy is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960s.
The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period.
The main cause, though not the only cause, of the decline in the rate of profit has been a persistent tendency to overcapacity in global manufacturing industries."
There's more, too. Instead of siding with crackpot Summers, Krugman should expand his research and be of some use to us all.
I am not sure that it is correct to think about public debt as internal debt. It's all about energy.
That means that public debt is to a large extent foreign due to unalterable oil consumption (and related trade deficits). And that completely changes the situation unless you are the owner of the world reserve currency.
But even in the latter case (exorbitant privilege as Valéry Giscard d'Estaing called it ) you can expect attacks on the status of the currency as world reserve currency. The growth is still supported via militarization, forced opening of foreign markets (with military force, if necessary) and conversion of the state into national security state. But as Napoleon admitted "You can do anything with bayonets except sit on them"
One positive thing about high public (and to a large extent foreign owned) debt in the USA is that it undermines what Bacevich called "new American militarism" (http://www.amazon.com/The-New-American-Militarism-Americans/dp/0195173384). Bacevich argues that this is distinct political course adopted by the "defense intellectuals," the evangelicals, and the neocons. And they will never regret their failed efforts such as Iraq invasion.
From Amazon review:
=== Quote ===
Bacevich clearly links our present predicaments both at home and abroad to the ever greater need for natural resources, especially oil from the Persian Gulf. He demolishes all of the reasons for our bellicosity based on ideals and links it directly to our insatiable appetite for oil and economic expansion. Naturally, like thousands of writers before him, he points out the need for a national energy policy based on more effective use of resources and alternative means of production.
=== End of Quote ==
As Heinberg explained fossil fuels, primarily oil, permeate every aspect of our modern culture - from agriculture to cities and a long-term perspective. In the age of almost 7 billion people demanding more and more of limited resources, the media, politicians and governments tend to only report short-term perspectives and ignore Heinberg's Five Axioms of Sustainability to the extent that these concepts are taboo to be spoken, discussed or thought (Heinberg, Richard (2007) Five Axioms of Sustainability):
1. (Tainter’s Axiom): Any society that continues to use critical resources unsustainably will collapse.
Exception: A society can avoid collapse by finding replacement resources.
Limit to the exception: In a finite world, the number of possible replacements is also finite.
2. (Bartlett’s Axiom): Population growth and/or growth in the rates of consumption of resources cannot be sustained.
3. To be sustainable, the use of renewable resources must proceed at a rate that is less than or equal to the rate of natural replenishment.
4. To be sustainable, the use of non-renewable resources must proceed at a rate that is declining, and the rate of decline must be greater than or equal to the rate of depletion.
The rate of depletion is defined as the amount being extracted and used during a specified time interval (usually a year) as a percentage of the amount left to extract.
5. Sustainability requires that substances introduced into the environment from human activities be minimized and rendered harmless to biosphere functions.
In cases where pollution from the extraction and consumption of non-renewable resources that has proceeded at expanding rates for some time threatens the viability of ecosystems, reduction in the rates of extraction and consumption of those resources may need to occur at a rate greater than the rate of depletion.
Archaeologist Joseph Tainter, in his classic study The Collapse of Complex Societies (1988), demonstrated that collapse is a frequent if not universal fate of complex societies and argued that collapse results from declining returns on efforts to support growing levels of societal complexity using energy harvested from the environment. Jared Diamond’s popular book Collapse: How Societies Choose to Fail or Succeed (2005) similarly makes the argument that collapse is the common destiny of societies that ignore resourse constraints. This axiom defines sustainability by the consequences of its absence—that is, collapse.
Adapted from Wikipedia
Excluding the current, there were two period of stagnation in the USA history:
Construction of structures, residential, commercial and industrial, fell off dramatically during the depression, but housing was well on its way to recovering by the late 1930s.
The depression years were the period of the highest total factor productivity growth in the United States, primarily to the building of roads and bridges, abandonment of unneeded railroad track and reduction in railroad employment, expansion of electric utilities and improvements wholesale and retail distribution.
The war created pent up demand for many items as factories that once produced automobiles and other machinery converted to production of tanks, guns, military vehicles and supplies. Tires had been rationed due to shortages of natural rubber; however, the U.S. government built synthetic rubber plants. The U.S. government also built synthetic ammonia plants, aluminum smelters, aviation fuel refineries and aircraft engine factories during the war. After the war commercial aviation, plastics and synthetic rubber would become major industries and synthetic ammonia was used for fertilizer. The end of armaments production free up hundreds of thousands of machine tools, which were made available for other industries. They were needed in the rapidly growing aircraft manufacturing industry.
The memory of war created a need for preparedness in the United States. This resulted in constant spending for defense programs, creating what President Eisenhower called the military-industrial complex.
U.S. birth rates began to recover by the time of World War II, and turned into the baby boom of the postwar decades. A building boom commenced in the years following the war. Suburbs began a rapid expansion and automobile ownership increased.
High-yielding crops and chemical fertilizers dramatically increased crop yields and greatly lowered the cost of food, giving consumers more discretionary income. Railroad locomotives switched from steam to diesel power, with a large increase in fuel efficiency. Most importantly, cheap food essentially eliminated malnutrition in countries like the United States and much of Europe.
Many trends that began before the war continued:
- The use of electricity grew steadily as prices continued to fall, although at slower rate than in the early decades. More people purchased washing machines, dryers, refrigerators and other appliances. Air conditioning became increasingly prevalent in households and businesses. See:Diffusion of innovations#Diffusion data
- Infrastructures: The highway system continued to expand. Construction of the interstate highway system started in the late 1950s. The pipeline network continued to expand. Railroad track mileage continued its decline.
- Better roads and increased investment in the distribution system of trucks, warehouses and material-handling equipment, such as forklift trucks continued to reduce the cost of goods.
- Mechanization of agriculture increased dramatically, especially the use of combine harvesters. Tractor sales peaked in the mid-1950s.
One of the first researchers who clearly attributed secular stagnation problem to neoliberalism was Alan Nasser, Professor Emeritus of Political Economy and Philosophy at The Evergreen State College. In his September 22, 2005 paper ECONOMIC LAWS, STRUCTURAL TENDENCIES, SECULAR STAGNATION THEORY, AND THE FATE OF NEOLIBERALISM he pointed out the key features of secular stagnation long before Summers started to understand the problem and even befor the economic crash of 2008 ;-)
September 22, 2005 | alannasser.org
Alan Nasser Invited presentation, University of Lille,
"We have now grown used to the idea that most ordinary or natural growth processes (the growth of organisms, or popu- lations of organisms or, for example, of cities) is not merely limited, but self-limited, i.e. is slowed down or eventually brought to a standstill as a consequence of the act of growth itself. For one reason or another, but always for some reason, organisms cannot grow indefinitely, just as beyond a certain level of size or density a population defeats its own capacity for further growth."
Sir Peter Medawar, The Revolution of Hope
"A business firm grows and attains great strength, and afterwards perhaps stagnates and decays; and at the turning point there is a balancing or equilibrium of the forces of life and decay. And as we reach to the higher stages of our work, we shall need ever more and more to think of economic forces as those which make a young man grow in strength until he reaches his prime; after which he gradually becomes stiff and inactive, till at last he sinks to make room for other and more vigorous life."
Alfred Marshall, Principals of Economics (1890)
"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it."
Joseph Schumpeter, Ten Great Economists
In this paper I shall address two major issues. Firstly, I shall discuss the implications for economic theory of a conception of economic laws widely at variance with the empiricist and/or positivist account of what laws are, how they are discovered, and how they are related to theory. At the same time, I will reject one cornerstone of anti-positivist thought, namely the idea that one cannot provide an account of laws that is fundamentally the same for the natural and the social sciences. Thus, I shall argue that an anti-positivist account of laws is entirely compatible with a conception of scientific laws that applies to both the "hard" (natural) and the "soft" (social) sciences. I shall defend this position by showing its application to economics and economic laws. In doing so, I will compare and contrast both natural-scientific (primarily physical) laws and social-scientific (primarily economic) laws. Secondly, I will argue that perhaps the most significant economic law descriptive of mature capitalism is the law of secular stagnation. The latter states that it is the natural tendency of a developed, industrialized capitalist economy to default to a state of chronic excess capacity and underconsumption. And this is itself a result of the tendency in advanced capitalism for the economic surplus (roughly, the difference between the Gross Domectic Product and the cost of producing the GDP) to grow at a rate more rapid than the growth of profitable industrial investment opportunities. In the course of my discussion I will use the United States as a paradigm case, Much as Marx attempted to identify the underlying features of the accumulation process by reference to England during the Industrial Revulution.
This has in fact been the state of global capital since the end of the "Golden Age" and the commencement of the age of globalized Reaganism/Thatcherism, i.e. the Age of Neoliberalism. I date the transition as commencing in 1973, the last year of post-War Keynesian growth rates in the USA. In fact, I will argue, neoliberal economic policy exacerbates capitalism'a tendency to stagnation. Let me begin with an account of economic laws.
LAWS, GENERATIVE MECHANISMS AND TENDENCIES
On the Humean or radical empiricist (positivist) account of laws, the latter are descriptions of observed regularities. Presumably, the scientist observes a "constant conjunction" of different kinds of happening, and infers from the regularity of the conjunction that the latter could not be merely accidental, and so concludes that the observed pattern of regularities must be nomological or law-like. 'Sodium chloride dissolves in water' and 'Metal expands when heated' would be simple examples of the results of this account of how laws of nature are discovered.
That this empiricist account is flawed becomes evident when we consider full-fledged laws of a genuine natural science, e.g. physics. I emphasize that laws are components of theories, which themselves are constitutive of established scientific disciplines, such as physics, chemistry, and biology. In fact, the two "laws" mentioned at the end of the preceding paragraph are not laws of physics at all. Among the genuine laws of physics is, e.g., 'Falling bodies near the surface of the earth accelerate at a constant rate.' This law is certainly not established by the observation of repeated conjunctions of events. On the contrary, actually observed falling bodies in "open systems", that is, in the circumstances of everyday life, conspicuously fail to conform to this law. Yet this is not taken to refute the law. For the law describes the behavior of bodies in a vacuum, that is to say, in a "closed system", one created by the scientist, typically in a laboratory situation. Philosophers of science have tended to ignore the distinction between regularities observed only in closed systems, and conjunctions observed in everyday life, which, as such, have no value as contributions to scientific knowledge. These philosophers have, accordingly, written as if the regularities in question were features of open systems, of nature. This confusion impedes our understanding of all types of laws, from physical to economic.
This failure –until relatively recently- of philosophers of science to properly attend to the importance of laboratory work in the acquisition of scientific knowledge is due to the fact that these philosophers have focused almost exclusively on science as established theory, i.e. as a way of representing the world. They had ignored how these theories were actually established. That is, they paid little attention to experiment, which is a way of intervening in the world. This inattention to what happens in closed systems created in the laboratory led thinkers to miss the importance of the concept of tendencies or dispositions in grasping the concept of a law of science. Let us dwell on this point and its relation to economic laws.
It is not that our knowledge of natural laws is not based on observed regularities. The point, rather, is that these regularities are not found in nature. They are found in closed systems, elaborately designed experimental circumstances found in laboratories. Yet, we correctly believe that what we learn in experimental situations gives us knowledge that is not confined to these situations. We believe that what we learn from observations of repeated patterns in experiments gives us not only knowledge of the behavior of objects in laboratory circumstances, but also knowledge of these same (kinds of) objects as they behave in nature, in the open systems of everyday life. But scientifically significant repeated patterns are not found in the world of daily life. This raises profound epistemological and ontological questions.
The most significant epistemological question arises from the following consideration: Were it not for the intervention of the experimenter, closed-system regularities would not obtain. Hence, the experimenter is a causal agent of the pattern of regularities observed in the laboratory. It is these contrived conjunctions which we invoke to justify our belief in (usually causal) laws. And while these regularities are the (partial) result of the intervention of the experimenter, we do not believe that the experimenter in any way originates the laws whose existence is attested to by the contrived regularities. The question therefore arises: What justifies our (correct) belief that knowledge obtained in closed laboratory systems designed by an agent applies also in open systems, i.e. in nature, which of course is not designed by scientists and does not evidence the regularities found under designed experimental circumstances?
I want to suggest that this question comes to the same as the following question: What must nature be like, and what must experiment reveal, in order for experimental knowledge to be able to be legitimately extended to the world outside of the laboratory, i.e. to nature? Note that this is a Realist question: it asks what we must presuppose about the constitution of the world in order that our experimentally-based scientific beliefs be justified. This is the precise Realist counterpart to Kant's Idealist question: What must we presoppose our minds –as opposed to nature or the world- to be like in order for scientific knowledge to be possible? I will argue that the answer to our Realist question provides the conceptual resources to elucidate the general nature of economic laws and economic theory, and the nature of the subject matter investigated by economists.
I will argue that since we believe that what we learn by experimental observation justifies our claim to knowledge of the experimental objects as they behave in nature, we must assume that these objects possess natural structures, similar to what Aristotle and the scholastics called "natures" or "essences." A natural structure must be conceived as what Critical Realists call a generative mechanism (hereafter, GM). The latter is a specific mode of material organization. What GMs generate are tendencies or dispositions to behave in characteristic ways. The statement that a physical thing or a social institution or structure tends to generate characteristic regularities is a statement of a law. The natural structure of salt, expressed in chemistry as HCl, is such that when it is mixed with water, whose natural structure or organization is expressed as H2O, it tends to dissolve. Gases tend to expand when heated and falling bodies near the surface of the earth tend to accelerate at a constant rate. These are statements of chemical and physical laws. We shall see that precisely the same kind of analysis can be made of laws in economics.
Tendencies are not the same as trends. The latter are merely observed regularities; there need be no implication that an underlying structural feature of the thing in question generates the regularity. This feature of laws is reflected in ordinary language in non-scientific contexts: we might say "He has a tendency to exaggerate." We mean that a disposition to exaggerate is a natural expression of his underlying character. We do not usually mean that he exaggerates whenever it is possible for him to exaggerate. This is part of the meaning of 'tendency.' Thus, tendencies can exist without being exercised. This happens when, e.g. salt is not mixed with water. Salt's nomological tendency to dissolve in water remains its categorical property even in the absence of circumstances in which its tendency to dissolve can be exercised. In addition, tendencies can be exercised without being realized. This is the case in the natural sciences when we observe, in non-laboratory situations, falling bodies accelerating at different rates. Indeed, no falling body in open systems is observed to accelerate at a constant or the same rate. But of course this is not taken to falsify the law of falling bodies. In nature, GMs continue to act in their characteristic ways without producing the patterned outcomes observable in closed experimental systems. This is so because in nature a multiplicity of GMs combine, interact and collide such as to result in the (scientifically irrelevant) flux of phenomena of the everyday world. The realization of a natural tendency can, in other words, be offset by counteracting forces. Thus, empiricism's mistake is to fail to recognize that GMs operate independent of the effects they generate. That is, GMs endure and go on acting (in the way that experimental closure enables us to identify) in nature, i.e. in open systems, where patterned regularities do not prevail. Statements about tendencies are not equivalent, salva veritate, to statements about their effects. Laws may exist and exercise their tendencies or powers even though no Humean "constant conjunctions" are observed. (This would be the case if it happened that the practice of creating closed experimental conditions had never been engaged in, i.e. in a world without science.)
LAWS, GENERATIVE MECHANISMS AND TENDENCIES IN ECONOMICS
GMs are not confined to the natural world. Natural structures are not the only structures there are. Plainly, there are humanely constructed structures. Capitalism is one such structure. Structures of this kind, GMs, that are dynamic by nature, i.e. which are characteristically diachronic, be they natural or socially constituted, share the same ontology. This should not be confused with the radical empiricist (positivist) claim that the natural and the social sciences share the same method. Clearly they do not: closed experimental situations exist but are not typical i istic outcomes ceteris paribus, ie. other things being equal, i.e. ceteris absentibus, other things being absent. When we identify the tendency of a thing, we specify what will happen, as a matter of course, if interfering conditions are absent. That is the point of vacuums in the closed systems created in laboratory experiments: they permit exercised tendencies, i.e. tendencies in operation, to be realized. If we want to know what gases tend to do when acted upon by heat, we eliminate all potential counteracting forces by creating a vacuum in the chamber, so that both gas and heat can express their natures unimpeded.
Thus, implicit in both physical- and social-scientific practice is the crucial distinction between the exercise and the realization (or manifestation) of a tendency. This distinction is essential to structural analysis in economics because of the impossibility of creating the social equivalent of a vacuum in the social sciences, which deal with the open systems of everyday life, where a great many forces and tendencies collide. Accordingly, just as the law of the tendency of falling bodies to accelerate at a constant rate is not falsified by the failure of falling bodies to behave accordingly in open systems, so too, e.g., the law of the tendency of the growth of productive capacity to outpace the growth of profitable investment opportunities -the thesis of secular stagnation theory- is not undermined by the remarkable growth rates of the Golden Age. In both cases, the presence of offsetting factors prevents the structurally generated tendency from being realized or manifested. I argue that the same can be said for any putative economic law.
In social science –and this is most conspicuous in economics, the most theoretically developed of the human sciences- we compensate for the absence of experimentally closed systems by constructing their functional equivalent, which we might call, in terms redolent of Weber, an ideal-typical theoretical model. It is an unfortunate habit (perhaps a tendency in the above-elaborated sense…) of mainstream economists to employ these models as if they described the open-system observable facts of economic life. This is, I suspect, a consequence of the economic empiricist's mistake referred to above, namely to think that GMs, if they must be spoken of at all, are to be conceived as reducible to their effects. (Recall Hume's claim, inspired by his reading of Newton, to expunge all notions of "power", "generation" and "production" from his analyses.) But, as noted above, GMs in both the social and the natural sciences employ unrealistic models, i.e. models which do not pretend to offer the equivalent of a photographic representation of the world. In both natural-scientific experiments and social-scientific ideal-type models, an attempt is made to abstract from the nonessential. We seek to place the spotlight of theory on what is necessary to the situation, system or institution under investigation, and to prescind from the arbitrary and accidental. In economics we seek to identify those features of capitalism that make it what it is. This enables us to identify capitalism's distinct and characteristic tendencies, and to describe what will happen as a result of the exercise of these tendencies, ceteris absentibus.
That there are such tendencies seems to me to be uncontroversial. We all know, for example, that cyclical downturns are not mere empirical contingencies of capitalist development, but structurally generated tendencies which follow inexorably from the specific mode of organization (structure) of capitalism. And like all tendencies, their realization can be offset, as we have seen above, by counteracting factors, such as fiscal and monetary policy. Other examples would be what Marx called the tendencies of capital to concentrate and centralize. The tendency, and corresponding law, with which I will be primarily concerned in this paper is constitutive of the theory of secular stagnation, and is far more likely than the immediately foregoing examples to generate controversy. I refer to the tendency of mature capitalism to suffer from a chronic paucity of profitable industrial investment opportunities, relative to the great magnitude of its investable surplus. Let us look more closely at this tendency.
THE THEORY OF SECULAR STAGNATION
It is worth mentioning that the view that the continuous accumulation of capital is both essential to the normal development of capitalist societies and essentially self-limiting was held by virtually all of the major modern political economists, in the form of one version or another of the doctrine of the falling rate of profit. Adam Smith explained the secular decline of the profit rate by the increasing abundance of capital in a developing capitalist society. Ricardo and Mill believed that the rate of profit would be depressed by the diminishing productivity of the land which would drive up the price of wage goods and therefore of the wages of labor, and so drive down the profits of capital. Marx pointed to the increasing capital-intensity of industry and the paucity of working-class purchasing power relative to the productive capacity of the economy, as the principal threat to the profit rate. And Keynes held that in mature capitalist economies the "marginal efficiency of capital", i.e. the expected rate of return (over cost) on an additional unit of a given capital asset, would tend to decline. All these thinkers had an at least intuitive appreciation of the fact that the growth of capital tends to be terminally self-limiting. (It is worth citing a remark of Joseph Shumpeter at this point:
"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it.")
In my estimation, no one understood the underlying dynamics of the tendency to stagnation better than the Polish economist Michal Kalecki, who is known to have developed the essentials of Keynes's General Theory before Keynes himself (and to have produced far more elegant mathematical formulations thereof). Perhaps the best way to understand Kalecki's thought is to see him as having argued that certain features of a not-yet-mature industrializing economy persist after the process of industrialization has been accomplished, with the effect that the developed capitalist economy is saddled with a problem of chronic excess capacity. Let me sketch this train of thought.
In the course of their natural growth capitalist economies reach a level of industrial development characterizable as maturity, a point beyond which growth must either cease, or be sustained by exogenous (in a sense to be elucidated below) means. Straight away we are confronted with a rejection of an assumption that is implicit in mainstream neoclassical theory, viz. that both the supply and the demand curves shift, virtually automatically, to the right. On the stagnationist conceptualization of growth or development, the process of development is not everlasting, but rather is at some point accomplished. There is the period, industrialization, during which the economy is developing, and which culminates in a (finally) industrialized or developed infrastructure. At this stage there will have been built up, or "accumulated", a complement of plant and equipment in steel production, machine tools, power stations, transport systems, etc., that is capable of satisfying a level of consumption demand consistent with the moral limits of a reasonably civilized style of life, the constraints imposed by a finite fund of natural resources, and, most importantly for stagnation theory, the limited possibilities of what Marx called "expanded reproduction" imposed by the accumulation process itself.
This account point can be expanded as follows. During any period of industrialization, the growth of the capital goods industry (hereafter, following Marx, Department I, or DI) must outpace the growth of the consumption goods industries (hereafter, again following Marx, Department II, or DII). Indeed, it belongs to the nature of the process of industrialization that the demand for the output of DI cannot be a function of the behavior of consumption demand; during industrialization, investment demand is both rapid and relatively autonomous. For if the principal project is to develop the means of production, then a disproportionate share of national wealth must be devoted to investment/accumulation at the expense of consumption. Strategic capital goods such as transport and communications networks and steel mills cannot be built bit by bit. This is clear with respect to railroads (Recall Keynes's remark that "Two pyramids are better than one, and two masses for the dead better than one; but two railroads from London to York are not necessarily better than one."), but perhaps not as clear with respect to steel facilities.
Suppose 1) that the efficient production of steel requires equipment with the capacity to produce 200,000 tons of steel, and 2) that demand turns out to be for 300,000 tons. The investor has two alternatives, either to forgo an extra market or to take a chance and add another 200.000 tons. On the second alternative, the one virtually assured in a period of (rapid) industrialization, the manufacturer is left with a surplus capacity of 100,000 tons. Here we see, writ small, a crucial source of two basic tendencies of capitalist development, the unrelenting pressure to expand markets, and the tendency to overproduction of a specific kind, namely the overproduction of capital goods, the tendency to overaccumulation. Each of these tendencies is the basis of a corresponding law of economics: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency to expand markets, and: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency for the growth of productive capacity to outpace the growth of effective demand.
As we have seen, all the major classical political economists anticipated the stationary state; they all assumed that the period of development or industrialization would come to an end. Basic industries would be in place, and DI would be capable of meeting all the replacement and expansion demands of DII. Prescinding for the moment from the emergence of new industries, DI would no longer be a source of substantial expansion demand for its own output; most of DI's internal expansion demand would be extinct.
But this is not th hread of classical (and perhaps neoclassical) theory contains the assurance that the capitalist economy provides a mechanism that in the long run counteracts the tendency of the demand for the products of DI to peter out. As one might expect, this is the price mechanism, which brings about, in the circumstances described above, a falling rate of profit (or interest) and thereby a simultaneous check on accumulation and spur to consumption. The causal chain is simple: the fall of the profit rate would lower capital's share of national income, i.e. it would transfer income from capital to labor. Thus, the demand gap created by the sharp waning of DI's expansion demand would be made up by the increase in consumption demand, which would of course mean an expansion in the demand for the output of DII. Moreover, an immediate expansion of DII at the expense of DI in order to assure a rapid transition out of the stationary state would be entirely feasible given the adaptability of certain key industries in DI to new market conditions resulting from the newly-expanded purchasing power of the working class. The construction of new factories could, for example, yield to the construction of new homes.
The theoretical elegance of this scenario is impressive -almost inspirational- but, alas for illusions, the price mechanism does not work this way. For the above-mentioned transfer in national income from capital to labor is supposed to happen when industrialization comes to an end by virtue of its having been accomplished. But from the capitalists' perspective, it is as if nothing counts as industrialization coming to an end. New industries, for example, can create a situation functionally equivalent to industrialization. "Accumulate, accumulate, that is Moses and the prophets."
We have at this point arrived at a picture of a developed capitalist economy which is in a state of permanent industrialization. Excess capacity prevails and working-class income is stagnant or declining. Interestingly, this has in fact been the state of both the U.S. and the global economy since 1973. According to the foregoing analysis, this reflects the fact that the U.S. and global economies are now instances not merely of the exercise of the law of the tendency of mature capitalism to stagnate, but of its realization. To put it differently: these economies are now in their natural state.
But important questions immediately arise. Why are these economies in their natural state now? And if there is a structurally generated tendency for capitalist economies to stagnate, how shall we account for the historically unprecedented growth rates of the Golden Age? I have barely sketched an outline of a response to these challenges above: if there is indeed a tendency for capitalism to stagnate, then there must have been in operation during the Golden Age what I called "counteracting forces and tendencies" which had spent themselves by the mid-1970s. In the absence of new offsetting forces, the tendency to stagnate has, as we should expect, re-asserted itself. These claims require further elaboration, and it is to this task that I now turn.
SECULAR STAGNATION AND TRANSFORMATIONAL GROWTH
In order to account for the actual pattern of capitalist growth in the context of stagnation theory, we must reflect on the kind of growth required by capitalist economic arrangements. Mainstream theory does not distinguish between kinds of growth if and when it addresses the specific requirements of capitalist growth at all. This is, I believe, a serious error. I will begin by introducing the notion of transformational growth, which transforms the entire way of life of society and absorbs exceptionally large amounts of the investible surplus. My point shall be that a capitalist economy cannot sustain growth merely by producing more and more different types of widgets, in the absence of pervasive structural change. Growth sustained in the latter manner is transformational growth.
We are forced to introduce the concept of transformational growth for reasons related to my earlier discussion of the structural features of mature capitalism which generates a chronic tendency to stagnation. I will now embellish this analysis. It should be clear that capitalism cannot grow in the way in which a balloon grows: its growth cannot leave its proportions intact, i.e. such that there are no new products and no new processes of production. This is to say that a capitalist economy either undergoes transformational growth or it stagnates. The argument is as follows.
Investment expands productive capacity, which in turn requires that demand increase at the same rate as potential production. Without the required rate of demand growth, underutilization/excess capacity will discourage further investment or capital accumulation and the result will of course be stagnation. Let us not address this issue in the manner of the neoclassical economist, who seems to assume that both supply and demand curves can be counted on to perennially shift to the right (absent, of course, undue government interference). But this quaint assumption is belied by the enormous literature on the development and indispensability to capitalism of the marketing and advertising industries, which we might view as massive efforts to counteract Keynes's declining marginal propensity to consume by deliberately creating among the consuming masses a full panoply of "manufactured" consumption desires. These considerations point to the need constantly to exogenously stimulate consumption demand in order to narrow the demand gap generated by the tendency to overaccumulation. But they do not yet establish the need to generate a broad, nation-wide pattern of demand required by structural change and transformational growth.
What is needed at this point are concrete examples of the generators of transformational growth, and of exactly how these generators accomplish one of the fundamental features of transformational growth, the mobilization and coordination of the economic resources of the entire country into a grand national project which stimulates demand not merely for this and that consumption good, but for crucial commodities and institutions such as oil, steel rubber, and other primary products, and communication and transportation facilities. What this requires are what Paul Baran and Paul Sweezy termed, in their influential Monopoly Capital (Monthly Review Press, 1966), "epoch-making innovations". Edward Nell and Robert Heilbroner have characterized these same innovations as "transformative innovations". Let me approach transformative innovations by looking at the tendency to stagnation from yet another perspective, one which focuses on the role of competition as a major force behind the growth of both investment and consumption.
Competition reduces the need for investment by tending to increase both productivity and savings. Let us see how this happens. As a result of competition business is under continuous pressure to cut costs and produce more efficiently. To the extent that business succeeds in these respects, productive potential is increased. At the same time, competition also requires business to hold down wages and salaries and to pay out dividend and profit income relatively sparingly. Together, these pressures hold back both worker and capitalist consumption. The result is a tendency for productive capacity to expand faster than consumption. This means that there is no reason for investment to grow, for capital to achieve the required rate of accumulation, unless there are major pressures transforming the way people live. In the absence of such pressures, we may expect stagnation.
There are two dimensions of transformative innovations which are in fact two aspects of the same phenomenon. One dimension is solely technological, and the other points to changes in a population's entire way of life. Neither of these is part of a process of steady, balloon-like growth, nor is either automatically, or normally, generated by the fundamental capitalist dynamics identified by the mainstream textbooks. For this reason I have called the stimulus imparted by these innovations 'exogenous'. Let us look first at the technological dimension of transformative innovation.
This can be identified, after the owl of Minerva has spread its wings, by reflecting on some of the requirements of ideal-typical capitalism. Neoliberals correctly remind us that the bottom line is of course "freedom", primarily the freedom of capital to roam the world seeking markets, sources of cheap labor and investment opportunities. Microecenomic textbooks in fact tend to assume the perfect mobility of both capital and labor.
Let us focus on sources of power, which became especially important after the industrial revolution. Technological development resulted in the virtually total replacement of human and animal muscle power by inanimate sources of power, mainly water and steam. But reliance on water as a source of power places extreme limits on the mobility of capital, and hence on the possibilities of capitalist growth. Water power is site-specific, and the number of rivers and streams is limited. Moreover, the water had to be fast-running and productive facilities had to be located as far downstream as possible. And of course water power is only seasonally available. These restraints alone place an intolerable obstacle to the free and ongoing accumulation of capital. Here we find an overwhelming incentive to switch from water to steam power. This constitutes a huge stimulus to the accumulation of capital on a national scale.
Capitalism requires sources of power that are independent of nature and can be applied constantly wherever they are needed. And these are precisely what steam power made possible. It was now possible to set up productive facilities virtually anywhere; a major fetter to the accumulation of capital was removed. The universal mobility required by capital was now much more fully realized. At this point I want to emphasize that this technological /economic transformation was necessarily accompanied by profound social and cultural changes. For the steam engine's reduction of the seasonality of water power made possible a feature of work that is increasingly common on a global scale: the emergence of modern year-round work habits. With this change comes a dramatic transformation of our notions (and practices) of work and leisure, with all the consequences these have for the felt experience of everyday life. That is an instance of the second dimension of transformative innovation, i.e. its introduction of dramatic cultural changes, changes in the way populations live.
Much the same can be said for the subsequent shift to electrical power, which makes possible trolley cars, refrigerators (as opposed to what used to be called, in the U.S., "ice boxes"), ranges, toasters, radios, washing machines, fans, et al.
The railroad too is a transformative innovation par excellence. Consider the spectacular effects of railroad expansion: internal transport costs are sharply reduced; both new products and new geographical areas are brought into commercial markets; it is now possible to deliver exports to port with unprecedented efficiency, thereby encouraging the extensive development of the export sector; and impetus is provided to the development of the coal, iron and engineering industries. As with the steam engine, these technological and economic benefits wee necessarily accompanied by profound social and cultural changes. The railroads changed the way of life of the people by binding them as never before. The possibility now existed for mass production, mass consumption and indeed mass culture.
And of course the establishment of a national rail network absorbed massive amounts of investible capital, thereby spurring sustainable growth and offsetting the realization of the economic law that capitalist economies tend to stagnate. Apropos: in the latter third of the nineteenth century, railroad investment in the U.S. amounted to more than all investment in manufacturing industries.
And who can doubt that the transformative effects of the introduction of the automobile were epoch-making? The expansion of the automobile industry was the single most important force in the economic expansion of the 1920s. Car production increased threefold during this decade. (The automobile industry produced 12.7% of all manufactured output, employed 7.1% of all manufacturing workers, and paid 8.7% of all industrial wages.) Immediately after World War II the auto industry continued what was to be its breakneck expansion, and the possibilities created thereby constituted what was perhaps the most extensive transformation of the country's way of life in its history.
Consider the stimulus to capital accumulation and employment constituted by the following, each and all a consequence of the increasing automobilization of American society and culture: the migration of the population from the central city to the suburbs and exurbs (first made possible by the streetcar, before the major streetcar operations were bough and then quickly dismantled by the auto companies); the need for surfaced roads, road construction and maintenance, highway construction and maintenance (which had already accounted for 2% of GDP in 1929); the suburbanization of America, with the attendant construction of housing, schools, hospitals, workplaces, and more; the growth of shopping malls; the expansion of the credit industry; the spread of hotels and motels; and of course the growth of the tourism/travel industry. Never before had any population's way of living been transformed so profoundly in so short a period of time. And of course no one has failed to recognize that Americans' main symbol of their most precious possession, their personal freedom/liberty, is their ability to drive, solo, cars that have increasingly come to resemble tanks. Americans' liberty, embodied in the automobile, has become, literally, a commodity.
The long-term growth of the U.S. economy cannot be adequately explained or described without reference to these transformative innovations. None of these are required by the models of capital accumulation found in neoclassical, Keynesian or Marxian growth theory. After the civil war, growth in the last third of the nineteenth century was spurred primarily by the railroads. This stimulus fizzled, as railroad expansion began to slow down, around 1907, when, in spite of extensive electrification of urban (and even some rural) areas, the U.S. economy began a stretch of slow growth, which lasted until the outbreak of World War I. After the end of the War, the economy experienced a brief slump, which was followed by a period of fairly sustained expansion in the 1920s. The latter, as we have seen, was spurred mainly by the growth of the automobile industry. But the rate of growth of the automobile industry slowed down after 1926, and with it the rate of growth of almost all other manufacturing industries. And wages and employment had not risen as rapidly as production, productivity or profits.
In fact, the economic situation in the U.S. at the end of the 1920s bore a remarkable resemblance to the current economic situation in America. After 1926 overcapacity emerged in many key industries, the most significant of these being automobiles, textiles, and residential construction. Contractionary forces are cumulative: excess capacity caused business confidence to decline, with resulting cutbacks in spending on productive capacity in the consumer durables and capital goods industries. The economy was intensely unsound at the end of the 1920s, and the indications at the time were clear. Consumer demand was held down by a steadily growing inequality of income. Thus, an increasing percentage of total purchases were financed by credit in order to foster purchases of consumer durables. About seventy-five percent of all cars were sold on credit. Accordingly, both home mortgages and installment debt grew rapidly. This was the extension of a trend that had begun as early as 1922, when total personal debt began rising faster than disposable income. Thus, underconsumption and traces of excess capacity, key indicators of stagnationist forces, were in effect from the very beginning of the "roaring '20s". These tendencies became increasingly foregrounded over the course of the decade.
Excess capacity in key manufacturing industries was displacing workers from capital-intensive, technologically advanced sectors to industries relatively devoid of technological advance, i.e. service industries such as trade, finance and government. With capital unable to find sufficiently profitable investment opportunities in high-productivity industries, rampant speculative activity ensued, fostered by the growing concentration of income and therefore savings during the decade. More than two thirds of all personal savings was held by slightly over two percent of all families. The wanton optimism of the 1920s led those with substantial savings to want to get richer quickly, and with little effort. The stock market bubble that materialized at the end of the decade seemed to justify the expectations that fortunes could be made overnight in real estate and the stock market. When investors acted on these expectations, the existing bubble became bigger and hence more fragile. To those familiar with the current state of the U.S. economy, the present situation presents itself as history repeating itself -contra Marx- yet again as farce.
FROM GREAT DEPRESSION TO GOLDEN AGE TO NEOLIBERALISM
The mounting instabilities of the economy of the 1920s led to a Depression that was unresponsive to the Roosevelt administration's elevenfold increase in government spending. When U.S. entry into World War II finally brought about a resumption of growth, there was nonetheless an abiding fear among economists that once War spending ceased, the forces and tendencies that had generated the Depression might reassert themselves and exceptionally slow growth could resume. Instead, much to the surprise of many economists, American capitalism began the most sustained period of expansion in its entire history. The period from 1947 to 1973 has come to be called "The Golden Age", and appears, on the face of it, to be a fatal anomaly with respect to secular stagnation theory. After all, if the causes of the Great Depression were structural, and the exogenous stimulus provided by the War was what produced a resumption of growth, how was it possible that the economy, in the absence of powerful exogenous stimulus, exhibited an historically unprecedented period of long-term growth?
I have suggested that sustained national (as opposed to intra-national regional) growth has been engendered by the emergence of transformative innovations, and it is this kind of consideration that I believe offers the most plausible explanation both of Golden-Age expansion and of the petering out of this growth period and the resumption of (global) stagnation. Five stimuli to long-term growth were set in motion after the War, and these were for the most part exogenous in the sense indicated, and essentially limited. I will construe these stimuli as forces counteracting the tendency to stagnation. Once most of these stimuli had spent their potential, stagnationist tendencies re-asserted themselves, and overinvestment became evident once again. With profitable industrial investment opportunities in short supply, the economic surplus was invested instead in what became a vast proliferation of financial instruments. When the bubble created by this process finally burst, it was replaced with a housing bubble. Indeed a variety of bubbles, in financial assets, in housing, in credit, and a substantially overvalued dollar now threaten an historically unparalleled reassertion of the tendency to stagnation. But let us look first at the counteracting forces.
After the War, and as a result of wartime rationing, Americans had accumulated a very large fund of savings, and the time had come when these could finally be spent. This accounted for an immediate surge of consumption spending which temporarily averted the onset of recession. But the effectiveness of this source of spending was soon spent. What truly impelled the sustained growth of the Golden Age was 1) the resumption of a vast expansion of the automobile industry, and with it the stimulation of the broad range of investment and employment opportunities discussed above in connection with automobilization; 2) large-scale economic aid to Europe, which stimulated export demand; 3) a nationwide process of suburbanization, which, in tandem with the expansion of auto production, expanded significantly the demand for the output of every other major industry; 4) the emergence of what president Eisenhower christened the "military-industrial" complex, which provided additional stimulus to the industries most vulnerable to economic instability, the industries of DI, the capital goods sector; and finally 5) the steady and growing expansion of business and especially consumer credit, which in recent years has assumed elephantine proportions.
Three of these factors bear the two most important features of epoch-making innovations. The expansion of the auto industry, suburbanization, and the ever-increasing expansion and extension of credit all absorb massive amounts of investible surplus, and transform the mode of life of the entire population. In so doing they impart a massive push to the macro-growth process. The first two of these have their initial direct effect on investment. The third factor, the growing importance of credit, affects both investment and consumption, but the long-term trend of the credit industry in the U.S., evident now in hindsight, is much more significant in relation to consumption. There is now in the States a credit bubble of menacing proportions, with consumers now in debt to the tune of about107% of disposable income. The Marshall Plan (number 2 above) affected mainly and directly investment and employment, with boosts to consumption following thereupon. By the mid- to late-1970s, the employment-generating capacity of the military had declined. Washington determined, in the light of the defeat in Vietnam, that hi-tech warfare, which is of course technology- rather than labor-intensive, must replace traditional forms of subversion and aggression, in order to render less likely a repeat of the "Vietnam Syndrome."
It is worth mentioning that the military-industrial complex and the vast extension of consumer credit were what constituted what Joan Robinson called "bastard Keynesianism" in the United States. Recall that Keynes had insisted that fiscal and monetary policy were necessary but not sufficient conditions for avoiding stagnation. The tendency to stagnation could be offset for the long run only if some key industries were nationalized, and income redistributed. Nationalization would allow the State to offset lagging demand by providing cheap inputs to the private sector, thereby enabling lower prices. And redistributing income would transfer liquidity from those who had more than they could either consume or invest to those whose consumption demand was severely constrained.
American policymakers saw it as their challenge to reap the effects of nationalization and redistribution without actually nationalizing industries or redistributing income. The solution was ingenious: the military-industrial complex would be the functional equivalent of state-owned industries, and would, as noted above, stimulate the demand for the output of those very firms that produced capital goods. And the extension of consumer credit would allow working people to mortgage future years' incomes and spend more without a corresponding increase in either their private or their social wage.
As mentioned earlier, these forces counteracting the tendency to stagnation were all inherently limited and temporary. By the late 1960s, the automobile industry had achieved maturity, suburbanization had been accomplished, and aid to Europe had not only long ended, but had apparently created for America the economic equivalent of Frankenstein's monster. Europe and Japan were now formidable threats to U.S. economic hegemony. (Germany, for example, has overtaken the U.S. as an exporter of capital goods.) These three colossal absorbers of surplus were now no longer in operation. In the mid-1960s social spending had overtaken military spending as the larger share of government spending. And credit had begun to function as a supplement to declining real income, rather than a further addition to growing income.
These combined developments rendered the post-War counters to the realization of the tendency to stagnation obsolete. The result was the onset of stagnation not only in the U.S. but also worldwide. In America there has been overcapacity in autos, steel, shipbuilding and petrochemicals since the mid- to late-1970s.
This general picture is widely reflected in the business press. Business Week noted that "..supply outpaces demand everywhere, sending prices lower, eroding corporate profits and increasing layoffs" (Jan. 25, 1999, p. 118). The former chairman of General Electric claimed that "..there is excess capacity in almost every industry" (The New York Times, Nov. 16, 1997, p. 3). The Wall Street Journal noted that "..from cashmere to blue jeans, silver jewelry to aluminum cans, the world is in oversupply" (Nov. 30, 1998, p. A17). And The Economist fretted that " the gap between sales and capacity is "at its widest since the 1930s" (Feb. 20, 1999, p. 15). At this time excess capacity in steel is exceeding twenty percent, in autos it has fluctuated around 30%. And these figures look good in comparison to unused capacity numbers in the "industries of the future" of the "New Economy", semiconductors and telecommunications. Not long ago, ninety-seven percent of fibre optic capacity was idle.
MAINSTREAM ECONOMICS AND STAGNATION THEORY
Let us begin with the indisputable fact that the regime of neoliberalism has brought with it a substantial decline in economic growth. The most widely cited study on this issue, produced for the IECD by Angus Maddison, shows that the annual rate of growth of real global GDP fell from 4.9% in 1950-1973 to 3 % in 1973-1998, a drop of 39 %. Theoretical commitments can guide perception: neoliberal economists either denied or ignored the decline in global growth because of their reliance on Say's Law, that it is not possible for total demand to fall below full-capacity supply over the long run. In my earlier remarks I offered an explanation of sluggish growth rates since 1973. Many orthodox economics have done something similar: they have offered explanations of the initial rise in excess capacity. But what has not been explained is why global supply did not eventually adjust itself to the slower rate of demand growth, with the result that in the mid-1970s the global economy would enter a period of sluggish expansion. And it is worth mentioning that even Keynesian macro-theory is inadequate in this regard. It assumes that slow growth in aggregate demand will result in a proportionate decline in the growth of aggregate supply through its effect upon investment and therefore productivity.
An adequate explanation of the sustained character of excess capacity can be constructed from insights from Schumpeter, Marx and the contemporary economist James Crotty. The analysis that follows should be understood within the framework of the version of secular stagnation theory sketched above.
Before the shift to neoliberal policies by Jimmy Carter, Reagan and Thatcher, the global economy was already subject to downward pressures on demand growth resulting from two oil price shocks and the restrictive macro policy imposed in response to oil-price induced inflation. These impediments to demand growth were exacerbated by neoliberal policies. In combination, these forces led to a sharp rise in excess capacity in globally competing industries. At the same time competitive pressures were further intensified by the reduction of the market power of national oligopolies caused by the removal of protectionist barriers to the free movement of goods and money across national boundaries. Accordingly, competitive pressures between nations rose dramatically. In this context, normal stagnationist tendencies operated to further constrain global demand growth and further reproduce industrial capacity faster than either neoclassical or Keynesian theory could comprehend.
The Achilles Heel of neoclassical theory with respect to its inability to account for the persistence of overcapacity during the neoliberal period is its account of competition. So-called "perfect competition" is alleged to lead to maximum efficiency and the elimination of excess capacity. This claim appears inconsistent with the history of real-world, pre- and post-oligopolistic competition. Textbook-like competition has led to periodic market gluts or overproduction crises, price wars, plummeting profits, unbearable debt burdens and violent labor relations. Neoclassical theory banishes these demons with the aid of two assumptions which appear designed explicitly to make them impossible. The first assumption claims that production cost per unit rises rapidly as output increases, and the second that exit from low-profit industries is free or costless. If these assumptions were indeed true, then pure competition could not be shown to have stagnation- or depression-inducing effects. But these assumptions are, I shall suggest, false.
I will begin with the least plausible of these two assumptions. It states that there is free or costless exit from low-profit industries. But productive assets are typically immobile or irreversible, i.e., they are not liquid, and this forces a sizeable loss in the value of a firm's capital should it choose to leave an unprofitable industry. Whether they are sold on a second-hand market or reallocated to a different industry, productive assets will lose substantial value. Capital flowing out of the aerospace industry has been found to sell for one third of its replacement cost. Insolvent telecom firms in the U.S. have sold their assets for 20 cents on the dollar. And isn't this what one would expect? For it is usually poor profit prospects and/or great excess capacity that heighten a firm's incentive to leave an industry. But it is precisely those circumstances which deeply depress the price of industry-specific assets on the second-hand market, since the supply of these assets grows even as the demand for them has collapsed.
Before I turn to the slightly more plausible (yet still false) assumption -that unit production cost rises dramatically as output increases- I will outline the corollary of neoclassical theory itself which neoclassical economists seek to evade by introducing this assumption. The theory tells us that pure competition will force price down until it covers marginal cost. Now if unit production cost remained constant irrespective of the output level, then marginal production cost and average production cost per unit would be equal. When perfect competition forces price to equal marginal cost, total revenue will be equal to total production cost. But in this case there will be no revenue left over either to pay the "fixed" cost of maintaining capital stock in the face of depreciation or obsolescence, or to pay interest and/or dividends to investors. Thus, perfect competition is seen to cause the representative firm to suffer, in each production period, a loss that is equal to fixed costs. Keeping in mind that most important global industries have huge fixed costs, no industry could long survive the consequences of intense competition.
We seem to have found a tendency to stagnation or complete system breakdown where we would least expect to find it - in neoclassical theory itself. But the theory claims to have a response to this embarrassment. It simply denies the claim that appears to entail the undesired consequence, namely the claim that unit production cost remains constant no matter what the output level. Armed now with the (false) assumption that unit production cost rises rapidly as production increases, the conclusion is drawn that marginal cost and price are greater than average unit production cost. Thus, in equilibrium, the gap between price and average production cost is sufficiently large to cover all fixed costs. Let competition be as fierce as you wish, the typical firm will not lose money. Voila!
I have claimed that each of the rescuing assumptions discussed above is false. What would realistic assumptions about marginal cost and the reversibility of invested capital look like? To answer this question we must recognize the distinctive character of the dominant industries of global trade and investment. These industries include steel, autos, aircraft, shipbuilding, petrochemicals, consumer durables, electronics, semiconductors and banking. Studies of this type of industry suggest that marginal cost does not typically rise with output, with the rare exception of cases when the industry is producing near full capacity output. Marginal cost behaves as we would expect in cases of economies of scale: it remains constant or declines as capacity utilization rises. It follows that if free competition forces price to equal marginal cost in these industries, we should count on an ensuing wave of bankruptcies. Here again we see that neoclassical theory, corrected for unrealistic assumptions, seems to commit us to conceptualize mature capitalism as subject to the law of an inherent tendency to stagnation or worse.
The issue I am focusing on here turns on the dynamics of unrestricted competition among oligopolies in the context of economies of scale. The importance of economies of scale underscores the crucial similarity of all the dominant industries, including the new information-technology and telecommunications (ITC) industries. I stress this point because influential neoclassical economists have wanted to claim a significant difference, with respect to overcapacity problems, between the ITC industries and the other dominant industries. For purposes of explaining the persistence of excess capacity under neoliberalism, we want to remember that as scale economies grow, marginal costs fall as fixed costs per unit rise. Thus, the greater the economies of scale, the more destructive becomes the marginal cost pricing required by intense competition. With this in mind, we can more easily see that 1) these dynamics in especially conspicuous operation in the ITC industries, and 2) that such differences as there are between ITC and the other dominant oligopolies are insignificant for the analysis of secular stagnation theory, and of capitalist growth in general.
The key issue right now, recall, is the highly destructive consequences of the tendency of free competition among dominant industries to force price to equal marginal cost. That this is the case is easier to see in the ITC sector than in the other dominant industries. This is because in ITC marginal cost is often close to zero. Producing another copy of software or adding another customer to eBay is virtually costless. This has led many mainstream economists to argue that ITC industries are exempt from the laws of the neoclassical theory of perfect competition. Since ITC firms have marginal costs much lower than their large fixed costs, the argument goes, the possession of at least temporary monopoly power is the only guarantee of an incentive to produce anything at all. Without monopoly pricing power prices will be competed down to marginal cost and fixed costs will be unable to be covered. Thus, the motor of the "new economy" is said to be the constant pursuit of monopoly power. But, contrary to the neoclassical claim, none of this distinguishes significantly between ITC and other key industries. The drive to monopoly power is characteristic of all large corporations in the present age.
As Paul Sweezy argued in his Marshall Lectures, the typical firm in an oligopolized industry strives to be a monopolist. Each firm does this individually, and they all do it collectively. Individual firms seek monopoly status through the sales effort, where the firm's product is put forth as the best in the industry and as different from all the others. Firms within the same industry seek to approach monopoly status by collusion with respect to pricing policy, especially by agreeing to refrain from cutthroat price competition. For reasons developed at length above, therefore, all dominant firms, whether old- or new-economy operations, will tend to achieve monopoly status and to be chronically saddled with excess capacity.
A SCANDALOUSLY BRIEF LOOK AT SLOW-GROWTH CAPITALISM
We are in the midst of another unparalleled period of historical capitalism. Since the onset of stagnation, the median wage in the States has not changed at all for the vast majority of wage workers. Over the past six quarters the gowth of wage income has been negative. A brief sketch of the state of the U.S. economy toward the end of last year highlights features whose most plausible explanation may lie in the fact of secular stagnation. If stagnation theory is accurate, what follows is precisely what we would expect to find. The current state of the U.S. and the global economy is best understood, I believe, against the background too briefly elaborated above. Here is a picture of the U.S. economy today. The key to a healthy economy is job- and income-creating investment in capital goods, which in turn generates a virtuous cycle of further growth in investment, jobs and income. Ominously, the investment, growth, employment and income pictures are unprecedentedly dismal.
Compared to cyclical recoveries between 1949 and 1973, recoveries during the neoliberal period have been weak. Indeed, one or two of the post-1973 upturns has been weaker than some downturns during the Golden Age. Since the stock market collapse of four years ago, the situation has worsened. Growth rates since 2000 have been half their previous average. Even this weak performance required historically unprecedented fiscal and monetary stimulus: 13 rate cuts, three tax cuts, massive government deficits and record growth in money and credit.
Official figures mask the economy's most serious problems. Growth figures are annualized by U.S. statisticians. Thus, the much-touted 7.1% growth rate in the third quarter of 2003 was the one that would emerge after twelve months if the current trend were to continue. The same growth rate would have been reported in the eurozone as 1.8%. This is an uncommonly weak performance.
Investment data are equally misleading. Since the mid-1990s the Bureau of Economic Analysis (BEA) has adjusted upward actual business dollar outlays on computers and related equipment to take into account quality improvements (faster processors, bigger hard drives, more memory). BEA calls this "hedonic adjustment." Accordingly, the BEA estimates that business high-tech investment quadrupled between 1996 and 2002, from $70.9 to $283.7. But in actual dollars spent, the increase was only from $70.9 billion to $74.2 billion, very low by historic standards. The high-tech boom was both greatly exaggerated and misleading. After all, neither profits nor wages are taken in "hedonically adjusted" dollars.
The difference between real and hedonic outlays explains what would otherwise be a paradoxical feature of the years 2000-2003: government was reporting big increases in high-tech investment, while manufacturers were bemoaning declining sales.
Hedonic pricing has accounted for a steadily rising percentage of all reported capital investment. But if we look at actual dollars spent, we find that since 1998 the growth rate of business fixed investment has actually been declining. Real capital investment has in fact not been this weak since the Great Depression.
The fudging of investment figures also obscures the sorry state of the jobs market. The Commerce Department's figures on nonresidential investment for the third and fourth quarters of 2003 reported increases of, respectively, 12.8 and 9.6%. A closer look reveals that the "adjusted" hi-tech sector is the only bright spot, with production and capacity rising, respectively, 24.6% and 11.1% over the past year. But hi-tech is not where significant jobs increases are found. Employment in hi-tech has declined steadily through the so-called "recovery" since its 2001 peak.
In non-hi-tech manufacturing, where investment figures are not adjusted, production from January 2003 to January 2004 rose only 0.9%, while capacity actually declined -0.2%. This represents a record nineteen-straight-month decline in mainline manufacturing capacity. Since it is mainline manufacturing which employs almost 95% of all manufacturing workers, it comes as no surprise that for the first time since the Great Depression the economy has gone more than three years without creating any jobs.
The jobs crisis is even worse than it appears. Here again statistical sleight-of-hand, this time by the Bureau of Labor Statistics (BLS), obscures economic reality. Based on data gathered employing the "net birth/death adjustment," BLS announced in April, 2004, that the long-awaited jobs recovery had finally arrived. Nonfarm payrolls had allegedly surged by a whopping 308,000 in March, 2004. The birth/death model uses business deaths to "impute" employment from business births. Thus, as more businesses fail, more new jobs are imputed to have materialized through business births. This improbable statistical artefact accounts for about half of the reported 308,000 March, 2004 payroll increase.
The birth/death model is based on statistics covering 1998-2002. This was a period of explosive telecom and dot.com startups, quite unlike today's flat economic landscape. Thus, two thirds of the 947,000 new jobs BLS "imputed" for March-May, 2004, were never actually counted by BLS and never reported by any firm.
BlS's household and establishment surveys tell a more sobering story. March employment by private industry actually fell by 175,000, and the number of self-employed workers declined by 288,000. Without the simultaneous increase of 439,000 government jobs, the March job announcement would have been a calamity. And both average weekly hours and total hours worked declined markedly, even as (according to the dubious birth/death findings) the work force increased. This is the first time in U.S. history that net job growth has been negative 26 months into a recovery.
The wage and salary picture has also set grim records. During the current recovery, wage and salary growth has actually been negative, at -0.6%, in contrast to the average increase of 7.2% characteristic of this point into each of the other eight post-War recoveries. In fact, median family income in the post-War period exhibits an ominous trend. From 1947 to 1967, real median family income rose by 75%. But since 1967, it has grown by only 30%.
Labor's losses have been capital's gain: since the peak of the last recovery, in the first quarter of 2001, corporate profits have risen 62.2%, compared to the average of 13.9% at the same point in the last eight recoveries. Never in American history has any recorded recovery had such a lopsided balance in the distribution of income gains between labor and capital.
Given the dismal investment, wage/salary and employment pictures, how has it been possible for consumption to have risen to 71% of GDP in the early nineties, from its prior post-War average of 66%? The answer is a growth rate of consumer debt never seen before in America. For the first time ever, in March 2001, overall debt levels (mortgage debt plus consumer debt, mainly credit card debt and car loans) rose above annual disposable income. And from 2001 to 2004 consumer debt rose from 101% to 116% of disposable income. In the first half of 2004, consumer borrowing has been at its highest ever. It has declined slightly in the meantime. So has consumer spending. Should Americans decide to significantly increase their saving and service debts, while lowering correspondingly their consumption expenditures, the global economy could experience a major disruption.
Up until very recently, consumers had stepped up their borrowing to compensate for slowing income growth. Thus, such growth as the U.S. has experienced in recent years has been almost entirely consumption- and debt-driven. More fundamentally, it has been bubble-driven, fueled principally by bubbles in home values and credit.
Since the collapse of stock market/hi-tech bubbles in 2001, the illusory "wealth effect" has been sustained, and consumer spending thereby encouraged, by another bubble, the enormous inflation of house prices. The biggest increase in household debt came from home mortgage debt, especially home mortgage refinancing. With mortgage rates low and home prices rising, households' home equity ballooned. Bloated home equity then provided rising collateral to underwrite still more borrowing.
What makes this especially problematic is that over the last ten years, the average family has suffered under large increases in health premiums, housing costs, tuition fees and child care costs. As a result, households' and individuals' margin of protection against insolvency has dramatically declined. Filings for personal bankruptcy are approaching a record high.
There are indications that these weaknesses and imbalances in the economy are reaching a critical mass. The mortgage refi boom has fizzled, and consumer spending is beginning to decline. Two years ago the Fed's quarterly Beige Book reported a disturbing shift in the composition of credit spending: more and more families are using their credit cards to finance spending on essentials, such as food and energy.
It is no exaggeration to say that both the U.S. economy and the global economy are hugely dependent on the American consumer's increasing willingness to spend more than (s)he makes. (Imported goods have been a rising proportion of all goods purchased here.) Thus, a decline in U.S. consumer spending portends further declines in investment, jobs and income. From January to July of 2004, consumer spending rose at an annual rate of 2.8%, down from 3.3% in 2003 and 3.1 % in 2002. For perspective, during the boom years 1999-2000, growth rates were 5.1% and 4.7%.
Spending on consumer durables is the most significant indicator of healthy growth, and the drastically lower spending in this area is cause for alarm: spending for consumer durables was down to $23.5 billion in the first seven months of this year, in contrast to $71 billion on 2003 and $58 billion in 2002.
Should consumer spending continue to decline, the economy faces the genuine likelihood of a severe recession. Of course not a single American politician addresses this issue.
What is required is a shift from bubble-, debt-, and consumption-driven growth to investment- and income-driven growth. This in turn necessitates a decline in Americas principal export, jobs. Domestic job growth, a higher minimum wage, tax cuts aimed predominantly at low- and middle-income families, a sharp reduction in defense spending and a redirection of these funds to long-neglected and pressing social needs such as health care reform, the provision of universal pre-school, and across-the-board repair and upgrading of America's deteriorated infrastructure of roads, highways,tunnels and bridges, all these should be at the forefront of a Democratic administration's agenda. The restoration of infrastructure is especially labor intensive, and would generate an enormous number of productive jobs. And as a national project spearheaded by government initiative, government would emerge as a major employer.
All this si entirely incompatible with the overwhelming neoliberal bent of even the most "liberal" political leaders. It was after all Bill Clinton who urinated on the grave of Franklin Roosevelt when he proclaimed "the end of welfare as we know it".
As unfashionable as it is to suggest such a thing at a conference of economists, the only hope for the world's majority seems to be the revival of the kinds of mass movements witnessed here in May of 1968, and throughout the world during the 1960s. And time may be short.
Alan Nasser is Professor emeritus of Political Economy and Philosophy at The Evergreen State College. His book, The “New Normal”: Persistent Austerity, Declining Democracy and the Globalization of Resistance will be published by Pluto Press in 2013. If you would like to be notified when the book is released, please send a request to email@example.com
Thomas Palley » Blog Archive » Explaining Stagnation Why it Matters
John Bellamy Foster and Fred Magdoff clearly identify stagnation in their 2009 book The Great Financial Crisis: Causes and Consequences (HERE). They conclude with a section titled “Back to the real economy: the stagnation problem” and they write:
“It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Ricardo Belliofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianiasm” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles” (Foster and Magdoff, p.129).”
My own 2009 New America Foundation report, “America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession”, concluded (HERE):
“The bottom line is macroeconomic failure rooted in America’s flawed economic paradigm is the ultimate cause of the financial crisis and Great Recession…. Now, there is a grave danger that policymakers only focus on financial market reform and ignore reform of America’s flawed economic paradigm. In that event, though the economy may stabilize, it will likely be unable to escape the pull of economic stagnation. That is because stagnation is the logical next stage of the existing paradigm.”
That report became a core chapter in my 2012 book, From Financial Crisis to Stagnation, the blurb for which reads (HERE):
“The U.S. economy today is confronted with the prospect of extended stagnation. This book explores why…. Financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post–World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change.”
The big analytical difference between Foster and Magdoff and myself is that they see stagnation as inherent to capitalism whereas I see it as the product of neoliberal economic policy. Foster and Magdoff partake of the Baran-Sweezy tradition that recommends deeper socialist transformation. I use a structural Keynesian framework that recommends reconstructing the income and demand generation mechanism via policies that include rebuilding worker bargaining power, reforming globalization, and reining in corporations and financial markets.
Larry Summers’ story of serial bubbles delaying stagnation has substantial similarities with both accounts but he avoids blaming either capitalism or neoliberalism. That is hardly surprising as Summers has been a chief architect of the neoliberal system and remains committed to it, though he now wants to soften its impact. Instead, he appeals to the black box of “secular stagnation” as ultimate cause and suggests fiscal policies that would ameliorate the demand shortage problem. However, those policies would not remedy the root cause of stagnation as they leave the economic architecture unchanged.
Though Summers and Krugman are relative late-comers to the stagnation hypothesis, they have still done a great public service by drawing attention to it. Now that stagnation has been identified, the real debate can begin.
The questions are what caused stagnation and what must be done to restore shared prosperity? There is no guarantee we will answer those questions correctly (my prior is mainstream economists will continue their track record of getting it wrong). But it is absolutely certain we will not get the right answer if we do not ask the right question. So thank you Larry Summers and Paul Krugman for putting stagnation on the table. Let the debate begin.
Tha means the major defeat for “stabilization policies” that were supposed to smooth the capitalist industrial cycle and abolish panics. And the problem preceeds the 2008 panic itself.
The highly misleading unemployment rate calculated by the U.S. Department of Labor notwithstanding, there has been a massive growth in long-term unemployment in the U.S. in the wake of the crisis, as shown by the declining percentage of the U.S. population actually working.
The current situation also refute the key tenet of neoclassical economy (which is pseudo-religious doctrine, so that only increase fanatic devotion of its well-paid adherents). Neoclassical economists insisted that since a “free market economy” naturally tends toward an equilibrium with full employment of both workers and machines, the economy should should quickly return to “full employment” after a recession. This is not the case. See also Secular Stagnation Lawrence H. Summers
There were several uncessful attempts to explaint his situation from neoclassical positions. In Secular Stagnation, Coalmines, Bubbles, and Larry Summers - NYTimes.com Paul Krugman emphasized the liquidity trap – zero lower bound to interest rates which supposedly prevents spending from reaching a level sufficient for full employment.
Larry’s formulation of our current economic situation is the same as my own. Although he doesn’t use the words “liquidity trap”, he works from the understanding that we are an economy in which monetary policy is de facto constrained by the zero lower bound (even if you think central banks could be doing more), and that this corresponds to a situation in which the “natural” rate of interest – the rate at which desired savings and desired investment would be equal at full employment – is negative.
And as he also notes, in this situation the normal rules of economic policy don’t apply. As I like to put it, virtue becomes vice and prudence becomes folly. Saving hurts the economy – it even hurts investment, thanks to the paradox of thrift. Fixating on debt and deficits deepens the depression. And so on down the line.
This is the kind of environment in which Keynes’s hypothetical policy of burying currency in coalmines and letting the private sector dig it up – or my version, which involves faking a threat from nonexistent space aliens – becomes a good thing; spending is good, and while productive spending is best, unproductive spending is still better than nothing.
Larry also indirectly states an important corollary: this isn’t just true of public spending. Private spending that is wholly or partially wasteful is also a good thing, unless it somehow stores up trouble for the future. That last bit is an important qualification. But suppose that U.S. corporations, which are currently sitting on a huge hoard of cash, were somehow to become convinced that it would be a great idea to fit out all their employees as cyborgs, with Google Glass and smart wristwatches everywhere. And suppose that three years later they realized that there wasn’t really much payoff to all that spending. Nonetheless, the resulting investment boom would have given us several years of much higher employment, with no real waste, since the resources employed would otherwise have been idle.
OK, this is still mostly standard, although a lot of people hate, just hate, this kind of logic – they want economics to be a morality play, and they don’t care how many people have to suffer in the process.
But now comes the radical part of Larry’s presentation: his suggestion that this may not be a temporary state of affairs.
2. An economy that needs bubbles?
We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate.
So you might be tempted to say that monetary policy has consistently been too loose. After all, haven’t low interest rates been encouraging repeated bubbles?
But as Larry emphasizes, there’s a big problem with the claim that monetary policy has been too loose: where’s the inflation? Where has the overheated economy been visible?
So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.
One way to quantify this is, I think, to look at household debt. Here’s the ratio of household debt to GDP since the 50s:
There was a sharp increase in the ratio after World War II, but from a low base, as families moved to the suburbs and all that. Then there were about 25 years of rough stability, from 1960 to around 1985. After that, however, household debt rose rapidly and inexorably, until the crisis struck.
So with all that household borrowing, you might have expected the period 1985-2007 to be one of strong inflationary pressure, high interest rates, or both. In fact, you see neither – this was the era of the Great Moderation, a time of low inflation and generally low interest rates. Without all that increase in household debt, interest rates would presumably have to have been considerably lower – maybe negative. In other words, you can argue that our economy has been trying to get into the liquidity trap for a number of years, and that it only avoided the trap for a while thanks to successive bubbles.
And if that’s how you see things, when looking forward you have to regard the liquidity trap not as an exceptional state of affairs but as the new normal.
3. Secular stagnation?
How did this happen? Larry explicitly invokes the notion of secular stagnation, associated in particular with Alvin Hansen (pdf). He doesn’t say why this might be happening to us now, but it’s not hard to think of possible reasons.
Back in the day, Hansen stressed demographic factors: he thought slowing population growth would mean low investment demand. Then came the baby boom. But this time around the slowdown is here, and looks real.
Think of it this way: during the period 1960-85, when the U.S. economy seemed able to achieve full employment without bubbles, our labor force grew an average 2.1 percent annually. In part this reflected the maturing of the baby boomers, in part the move of women into the labor force.
This growth made sustaining investment fairly easy: the business of providing Americans with new houses, new offices, and so on easily absorbed a fairly high fraction of GDP.
Now look forward. The Census projects that the population aged 18 to 64 will grow at an annual rate of only 0.2 percent between 2015 and 2025. Unless labor force participation not only stops declining but starts rising rapidly again, this means a slower-growth economy, and thanks to the accelerator effect, lower investment demand.
By the way, in a Samuelson consumption-loan model, the natural rate of interest equals the rate of population growth. Reality is a lot more complicated than that, but I don’t think it’s foolish to guess that the decline in population growth has reduced the natural real rate of interest by something like an equal amount (and to note that Japan’s shrinking working-age population is probably a major factor in its secular stagnation.)
There may be other factors – a Bob Gordonesque decline in innovation, etc.. The point is that it’s not hard to think of reasons why the liquidity trap could be a lot more persistent than anyone currently wants to admit.
4. Destructive virtue
If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.
Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”
He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.
Amazing stuff – and if we really are looking at secular stagnation, he’s right.
Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.
One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go the Krugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.
Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!
But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.
Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.
I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.
A secret question hovers over us, a sense of disappointment, a broken promise we were given as children about what our adult world was supposed to be like. I am referring not to the standard false promises that children are always given (about how the world is fair, or how those who work hard shall be rewarded), but to a particular generational promise—given to those who were children in the fifties, sixties, seventies, or eighties—one that was never quite articulated as a promise but rather as a set of assumptions about what our adult world would be like. And since it was never quite promised, now that it has failed to come true, we’re left confused: indignant, but at the same time, embarrassed at our own indignation, ashamed we were ever so silly to believe our elders to begin with.
Where, in short, are the flying cars? Where are the force fields, tractor beams, teleportation pods, antigravity sleds, tricorders, immortality drugs, colonies on Mars, and all the other technological wonders any child growing up in the mid-to-late twentieth century assumed would exist by now? Even those inventions that seemed ready to emerge—like cloning or cryogenics—ended up betraying their lofty promises. What happened to them?
We are well informed of the wonders of computers, as if this is some sort of unanticipated compensation, but, in fact, we haven’t moved even computing to the point of progress that people in the fifties expected we’d have reached by now. We don’t have computers we can have an interesting conversation with, or robots that can walk our dogs or take our clothes to the Laundromat.
As someone who was eight years old at the time of the Apollo moon landing, I remember calculating that I would be thirty-nine in the magic year 2000 and wondering what the world would be like. Did I expect I would be living in such a world of wonders? Of course. Everyone did. Do I feel cheated now? It seemed unlikely that I’d live to see all the things I was reading about in science fiction, but it never occurred to me that I wouldn’t see any of them.
At the turn of the millennium, I was expecting an outpouring of reflections on why we had gotten the future of technology so wrong. Instead, just about all the authoritative voices—both Left and Right—began their reflections from the assumption that we do live in an unprecedented new technological utopia of one sort or another.
The common way of dealing with the uneasy sense that this might not be so is to brush it aside, to insist all the progress that could have happened has happened and to treat anything more as silly. “Oh, you mean all that Jetsons stuff?” I’m asked—as if to say, but that was just for children! Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones offered of the Stone Age.
Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones did of the Stone Age.
Even in the seventies and eighties, in fact, sober sources such as National Geographic and the Smithsonian were informing children of imminent space stations and expeditions to Mars. Creators of science fiction movies used to come up with concrete dates, often no more than a generation in the future, in which to place their futuristic fantasies. In 1968, Stanley Kubrick felt that a moviegoing audience would find it perfectly natural to assume that only thirty-three years later, in 2001, we would have commercial moon flights, city-like space stations, and computers with human personalities maintaining astronauts in suspended animation while traveling to Jupiter. Video telephony is just about the only new technology from that particular movie that has appeared—and it was technically possible when the movie was showing. 2001 can be seen as a curio, but what about Star Trek? The Star Trek mythos was set in the sixties, too, but the show kept getting revived, leaving audiences for Star Trek Voyager in, say, 2005, to try to figure out what to make of the fact that according to the logic of the program, the world was supposed to be recovering from fighting off the rule of genetically engineered supermen in the Eugenics Wars of the nineties.
By 1989, when the creators of Back to the Future II were dutifully placing flying cars and anti-gravity hoverboards in the hands of ordinary teenagers in the year 2015, it wasn’t clear if this was meant as a prediction or a joke.
The usual move in science fiction is to remain vague about the dates, so as to render “the future” a zone of pure fantasy, no different than Middle Earth or Narnia, or like Star Wars, “a long time ago in a galaxy far, far away.” As a result, our science fiction future is, most often, not a future at all, but more like an alternative dimension, a dream-time, a technological Elsewhere, existing in days to come in the same sense that elves and dragon-slayers existed in the past—another screen for the displacement of moral dramas and mythic fantasies into the dead ends of consumer pleasure.
Might the cultural sensibility that came to be referred to as postmodernism best be seen as a prolonged meditation on all the technological changes that never happened? The question struck me as I watched one of the recent Star Wars movies. The movie was terrible, but I couldn’t help but feel impressed by the quality of the special effects. Recalling the clumsy special effects typical of fifties sci-fi films, I kept thinking how impressed a fifties audience would have been if they’d known what we could do by now—only to realize, “Actually, no. They wouldn’t be impressed at all, would they? They thought we’d be doing this kind of thing by now. Not just figuring out more sophisticated ways to simulate it.”
That last word—simulate—is key. The technologies that have advanced since the seventies are mainly either medical technologies or information technologies—largely, technologies of simulation. They are technologies of what Jean Baudrillard and Umberto Eco called the “hyper-real,” the ability to make imitations that are more realistic than originals. The postmodern sensibility, the feeling that we had somehow broken into an unprecedented new historical period in which we understood that there is nothing new; that grand historical narratives of progress and liberation were meaningless; that everything now was simulation, ironic repetition, fragmentation, and pastiche—all this makes sense in a technological environment in which the only breakthroughs were those that made it easier to create, transfer, and rearrange virtual projections of things that either already existed, or, we came to realize, never would. Surely, if we were vacationing in geodesic domes on Mars or toting about pocket-size nuclear fusion plants or telekinetic mind-reading devices no one would ever have been talking like this. The postmodern moment was a desperate way to take what could otherwise only be felt as a bitter disappointment and to dress it up as something epochal, exciting, and new.
In the earliest formulations, which largely came out of the Marxist tradition, a lot of this technological background was acknowledged. Fredric Jameson’s “Postmodernism, or the Cultural Logic of Late Capitalism” proposed the term “postmodernism” to refer to the cultural logic appropriate to a new, technological phase of capitalism, one that had been heralded by Marxist economist Ernest Mandel as early as 1972. Mandel had argued that humanity stood at the verge of a “third technological revolution,” as profound as the Agricultural or Industrial Revolution, in which computers, robots, new energy sources, and new information technologies would replace industrial labor—the “end of work” as it soon came to be called—reducing us all to designers and computer technicians coming up with crazy visions that cybernetic factories would produce.
End of work arguments were popular in the late seventies and early eighties as social thinkers pondered what would happen to the traditional working-class-led popular struggle once the working class no longer existed. (The answer: it would turn into identity politics.) Jameson thought of himself as exploring the forms of consciousness and historical sensibilities likely to emerge from this new age.
What happened, instead, is that the spread of information technologies and new ways of organizing transport—the containerization of shipping, for example—allowed those same industrial jobs to be outsourced to East Asia, Latin America, and other countries where the availability of cheap labor allowed manufacturers to employ much less technologically sophisticated production-line techniques than they would have been obliged to employ at home.
From the perspective of those living in Europe, North America, and Japan, the results did seem to be much as predicted. Smokestack industries did disappear; jobs came to be divided between a lower stratum of service workers and an upper stratum sitting in antiseptic bubbles playing with computers. But below it all lay an uneasy awareness that the postwork civilization was a giant fraud. Our carefully engineered high-tech sneakers were not being produced by intelligent cyborgs or self-replicating molecular nanotechnology; they were being made on the equivalent of old-fashioned Singer sewing machines, by the daughters of Mexican and Indonesian farmers who, as the result of WTO or NAFTA–sponsored trade deals, had been ousted from their ancestral lands. It was a guilty awareness that lay beneath the postmodern sensibility and its celebration of the endless play of images and surfaces.
Why did the projected explosion of technological growth everyone was expecting—the moon bases, the robot factories—fail to happen? There are two possibilities. Either our expectations about the pace of technological change were unrealistic (in which case, we need to know why so many intelligent people believed they were not) or our expectations were not unrealistic (in which case, we need to know what happened to derail so many credible ideas and prospects).
Most social analysts choose the first explanation and trace the problem to the Cold War space race. Why, these analysts wonder, did both the United States and the Soviet Union become so obsessed with the idea of manned space travel? It was never an efficient way to engage in scientific research. And it encouraged unrealistic ideas of what the human future would be like.
Could the answer be that both the United States and the Soviet Union had been, in the century before, societies of pioneers, one expanding across the Western frontier, the other across Siberia? Didn’t they share a commitment to the myth of a limitless, expansive future, of human colonization of vast empty spaces, that helped convince the leaders of both superpowers they had entered into a “space age” in which they were battling over control of the future itself? All sorts of myths were at play here, no doubt, but that proves nothing about the feasibility of the project.
Some of those science fiction fantasies (at this point we can’t know which ones) could have been brought into being. For earlier generations, many science fiction fantasies had been brought into being. Those who grew up at the turn of the century reading Jules Verne or H.G. Wells imagined the world of, say, 1960 with flying machines, rocket ships, submarines, radio, and television—and that was pretty much what they got. If it wasn’t unrealistic in 1900 to dream of men traveling to the moon, then why was it unrealistic in the sixties to dream of jet-packs and robot laundry-maids?
In fact, even as those dreams were being outlined, the material base for their achievement was beginning to be whittled away. There is reason to believe that even by the fifties and sixties, the pace of technological innovation was slowing down from the heady pace of the first half of the century. There was a last spate in the fifties when microwave ovens (1954), the Pill (1957), and lasers (1958) all appeared in rapid succession. But since then, technological advances have taken the form of clever new ways of combining existing technologies (as in the space race) and new ways of putting existing technologies to consumer use (the most famous example is television, invented in 1926, but mass produced only after the war.) Yet, in part because the space race gave everyone the impression that remarkable advances were happening, the popular impression during the sixties was that the pace of technological change was speeding up in terrifying, uncontrollable ways.
Alvin Toffler’s 1970 best seller Future Shock argued that almost all the social problems of the sixties could be traced back to the increasing pace of technological change. The endless outpouring of scientific breakthroughs transformed the grounds of daily existence, and left Americans without any clear idea of what normal life was. Just consider the family, where not just the Pill, but also the prospect of in vitro fertilization, test tube babies, and sperm and egg donation were about to make the idea of motherhood obsolete.
Humans were not psychologically prepared for the pace of change, Toffler wrote. He coined a term for the phenomenon: “accelerative thrust.” It had begun with the Industrial Revolution, but by roughly 1850, the effect had become unmistakable. Not only was everything around us changing, but most of it—human knowledge, the size of the population, industrial growth, energy use—was changing exponentially. The only solution, Toffler argued, was to begin some kind of control over the process, to create institutions that would assess emerging technologies and their likely effects, to ban technologies likely to be too socially disruptive, and to guide development in the direction of social harmony.
While many of the historical trends Toffler describes are accurate, the book appeared when most of these exponential trends halted. It was right around 1970 when the increase in the number of scientific papers published in the world—a figure that had doubled every fifteen years since, roughly, 1685—began leveling off. The same was true of books and patents.
Toffler’s use of acceleration was particularly unfortunate. For most of human history, the top speed at which human beings could travel had been around 25 miles per hour. By 1900 it had increased to 100 miles per hour, and for the next seventy years it did seem to be increasing exponentially. By the time Toffler was writing, in 1970, the record for the fastest speed at which any human had traveled stood at roughly 25,000 mph, achieved by the crew of Apollo 10 in 1969, just one year before. At such an exponential rate, it must have seemed reasonable to assume that within a matter of decades, humanity would be exploring other solar systems.
Since 1970, no further increase has occurred. The record for the fastest a human has ever traveled remains with the crew of Apollo 10. True, the commercial airliner Concorde, which first flew in 1969, reached a maximum speed of 1,400 mph. And the Soviet Tupolev Tu-144, which flew first, reached an even faster speed of 1,553 mph. But those speeds not only have failed to increase; they have decreased since the Tupolev Tu-144 was cancelled and the Concorde was abandoned.
None of this stopped Toffler’s own career. He kept retooling his analysis to come up with new spectacular pronouncements. In 1980, he produced The Third Wave, its argument lifted from Ernest Mandel’s “third technological revolution”—except that while Mandel thought these changes would spell the end of capitalism, Toffler assumed capitalism was eternal. By 1990, Toffler was the personal intellectual guru to Republican congressman Newt Gingrich, who claimed that his 1994 “Contract With America” was inspired, in part, by the understanding that the United States needed to move from an antiquated, materialist, industrial mind-set to a new, free-market, information age, Third Wave civilization.
There are all sorts of ironies in this connection. One of Toffler’s greatest achievements was inspiring the government to create an Office of Technology Assessment (OTA). One of Gingrich’s first acts on winning control of the House of Representatives in 1995 was defunding the OTA as an example of useless government extravagance. Still, there’s no contradiction here. By this time, Toffler had long since given up on influencing policy by appealing to the general public; he was making a living largely by giving seminars to CEOs and corporate think tanks. His insights had been privatized.
Gingrich liked to call himself a “conservative futurologist.” This, too, might seem oxymoronic; but, in fact, Toffler’s own conception of futurology was never progressive. Progress was always presented as a problem that needed to be solved.
Toffler might best be seen as a lightweight version of the nineteenth-century social theorist Auguste Comte, who believed that he was standing on the brink of a new age—in his case, the Industrial Age—driven by the inexorable progress of technology, and that the social cataclysms of his times were caused by the social system not adjusting. The older feudal order had developed Catholic theology, a way of thinking about man’s place in the cosmos perfectly suited to the social system of the time, as well as an institutional structure, the Church, that conveyed and enforced such ideas in a way that could give everyone a sense of meaning and belonging. The Industrial Age had developed its own system of ideas—science—but scientists had not succeeded in creating anything like the Catholic Church. Comte concluded that we needed to develop a new science, which he dubbed “sociology,” and said that sociologists should play the role of priests in a new Religion of Society that would inspire everyone with a love of order, community, work discipline, and family values. Toffler was less ambitious; his futurologists were not supposed to play the role of priests.
Gingrich had a second guru, a libertarian theologian named George Gilder, and Gilder, like Toffler, was obsessed with technology and social change. In an odd way, Gilder was more optimistic. Embracing a radical version of Mandel’s Third Wave argument, he insisted that what we were seeing with the rise of computers was an “overthrow of matter.” The old, materialist Industrial Society, where value came from physical labor, was giving way to an Information Age where value emerges directly from the minds of entrepreneurs, just as the world had originally appeared ex nihilo from the mind of God, just as money, in a proper supply-side economy, emerged ex nihilo from the Federal Reserve and into the hands of value-creating capitalists. Supply-side economic policies, Gilder concluded, would ensure that investment would continue to steer away from old government boondoggles like the space program and toward more productive information and medical technologies.
But if there was a conscious, or semi-conscious, move away from investment in research that might lead to better rockets and robots, and toward research that would lead to such things as laser printers and CAT scans, it had begun well before Toffler’s Future Shock (1970) and Gilder’s Wealth and Poverty (1981). What their success shows is that the issues they raised—that existing patterns of technological development would lead to social upheaval, and that we needed to guide technological development in directions that did not challenge existing structures of authority—echoed in the corridors of power. Statesmen and captains of industry had been thinking about such questions for some time.
Industrial capitalism has fostered an extremely rapid rate of scientific advance and technological innovation—one with no parallel in previous human history. Even capitalism’s greatest detractors, Karl Marx and Friedrich Engels, celebrated its unleashing of the “productive forces.” Marx and Engels also believed that capitalism’s continual need to revolutionize the means of industrial production would be its undoing. Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization’s effect is to drive down the general rate of profit.
For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.
As I’ve noted, there’s reason to believe the pace of technological innovation in productive processes—the factories themselves—began to slow in the fifties and sixties, but the side effects of America’s rivalry with the Soviet Union made innovation appear to accelerate. There was the awesome space race, alongside frenetic efforts by U.S. industrial planners to apply existing technologies to consumer purposes, to create an optimistic sense of burgeoning prosperity and guaranteed progress that would undercut the appeal of working-class politics.
These moves were reactions to initiatives from the Soviet Union. But this part of the history is difficult for Americans to remember, because at the end of the Cold War, the popular image of the Soviet Union switched from terrifyingly bold rival to pathetic basket case—the exemplar of a society that could not work. Back in the fifties, in fact, many United States planners suspected the Soviet system worked better. Certainly, they recalled the fact that in the thirties, while the United States had been mired in depression, the Soviet Union had maintained almost unprecedented economic growth rates of 10 percent to 12 percent a year—an achievement quickly followed by the production of tank armies that defeated Nazi Germany, then by the launching of Sputnik in 1957, then by the first manned spacecraft, the Vostok, in 1961.
It’s often said the Apollo moon landing was the greatest historical achievement of Soviet communism. Surely, the United States would never have contemplated such a feat had it not been for the cosmic ambitions of the Soviet Politburo. We are used to thinking of the Politburo as a group of unimaginative gray bureaucrats, but they were bureaucrats who dared to dream astounding dreams. The dream of world revolution was only the first. It’s also true that most of them—changing the course of mighty rivers, this sort of thing—either turned out to be ecologically and socially disastrous, or, like Joseph Stalin’s one-hundred-story Palace of the Soviets or a twenty-story statue of Vladimir Lenin, never got off the ground.
After the initial successes of the Soviet space program, few of these schemes were realized, but the leadership never ceased coming up with new ones. Even in the eighties, when the United States was attempting its own last, grandiose scheme, Star Wars, the Soviets were planning to transform the world through creative uses of technology. Few outside of Russia remember most of these projects, but great resources were devoted to them. It’s also worth noting that unlike the Star Wars project, which was designed to sink the Soviet Union, most were not military in nature: as, for instance, the attempt to solve the world hunger problem by harvesting lakes and oceans with an edible bacteria called spirulina, or to solve the world energy problem by launching hundreds of gigantic solar-power platforms into orbit and beaming the electricity back to earth.
The American victory in the space race meant that, after 1968, U.S. planners no longer took the competition seriously. As a result, the mythology of the final frontier was maintained, even as the direction of research and development shifted away from anything that might lead to the creation of Mars bases and robot factories.
The standard line is that all this was a result of the triumph of the market. The Apollo program was a Big Government project, Soviet-inspired in the sense that it required a national effort coordinated by government bureaucracies. As soon as the Soviet threat drew safely out of the picture, though, capitalism was free to revert to lines of technological development more in accord with its normal, decentralized, free-market imperatives—such as privately funded research into marketable products like personal computers. This is the line that men like Toffler and Gilder took in the late seventies and early eighties.
In fact, the United States never did abandon gigantic, government-controlled schemes of technological development. Mainly, they just shifted to military research—and not just to Soviet-scale schemes like Star Wars, but to weapons projects, research in communications and surveillance technologies, and similar security-related concerns. To some degree this had always been true: the billions poured into missile research had always dwarfed the sums allocated to the space program. Yet by the seventies, even basic research came to be conducted following military priorities. One reason we don’t have robot factories is because roughly 95 percent of robotics research funding has been channeled through the Pentagon, which is more interested in developing unmanned drones than in automating paper mills.
A case could be made that even the shift to research and development on information technologies and medicine was not so much a reorientation toward market-driven consumer imperatives, but part of an all-out effort to follow the technological humbling of the Soviet Union with total victory in the global class war—seen simultaneously as the imposition of absolute U.S. military dominance overseas, and, at home, the utter rout of social movements.
For the technologies that did emerge proved most conducive to surveillance, work discipline, and social control. Computers have opened up certain spaces of freedom, as we’re constantly reminded, but instead of leading to the workless utopia Abbie Hoffman imagined, they have been employed in such a way as to produce the opposite effect. They have enabled a financialization of capital that has driven workers desperately into debt, and, at the same time, provided the means by which employers have created “flexible” work regimes that have both destroyed traditional job security and increased working hours for almost everyone. Along with the export of factory jobs, the new work regime has routed the union movement and destroyed any possibility of effective working-class politics.
Meanwhile, despite unprecedented investment in research on medicine and life sciences, we await cures for cancer and the common cold, and the most dramatic medical breakthroughs we have seen have taken the form of drugs such as Prozac, Zoloft, or Ritalin—tailor-made to ensure that the new work demands don’t drive us completely, dysfunctionally crazy.
With results like these, what will the epitaph for neoliberalism look like? I think historians will conclude it was a form of capitalism that systematically prioritized political imperatives over economic ones. Given a choice between a course of action that would make capitalism seem the only possible economic system, and one that would transform capitalism into a viable, long-term economic system, neoliberalism chooses the former every time. There is every reason to believe that destroying job security while increasing working hours does not create a more productive (let alone more innovative or loyal) workforce. Probably, in economic terms, the result is negative—an impression confirmed by lower growth rates in just about all parts of the world in the eighties and nineties.
But the neoliberal choice has been effective in depoliticizing labor and overdetermining the future. Economically, the growth of armies, police, and private security services amounts to dead weight. It’s possible, in fact, that the very dead weight of the apparatus created to ensure the ideological victory of capitalism will sink it. But it’s also easy to see how choking off any sense of an inevitable, redemptive future that could be different from our world is a crucial part of the neoliberal project.
At this point all the pieces would seem to be falling neatly into place. By the sixties, conservative political forces were growing skittish about the socially disruptive effects of technological progress, and employers were beginning to worry about the economic impact of mechanization. The fading Soviet threat allowed for a reallocation of resources in directions seen as less challenging to social and economic arrangements, or indeed directions that could support a campaign of reversing the gains of progressive social movements and achieving a decisive victory in what U.S. elites saw as a global class war. The change of priorities was introduced as a withdrawal of big-government projects and a return to the market, but in fact the change shifted government-directed research away from programs like NASA or alternative energy sources and toward military, information, and medical technologies.
Of course this doesn’t explain everything. Above all, it does not explain why, even in those areas that have become the focus of well-funded research projects, we have not seen anything like the kind of advances anticipated fifty years ago. If 95 percent of robotics research has been funded by the military, then where are the Klaatu-style killer robots shooting death rays from their eyes?
Obviously, there have been advances in military technology in recent decades. One of the reasons we all survived the Cold War is that while nuclear bombs might have worked as advertised, their delivery systems did not; intercontinental ballistic missiles weren’t capable of striking cities, let alone specific targets inside cities, and this fact meant there was little point in launching a nuclear first strike unless you intended to destroy the world.
Contemporary cruise missiles are accurate by comparison. Still, precision weapons never do seem capable of assassinating specific individuals (Saddam, Osama, Qaddafi), even when hundreds are dropped. And ray guns have not materialized—surely not for lack of trying. We can assume the Pentagon has spent billions on death ray research, but the closest they’ve come so far are lasers that might, if aimed correctly, blind an enemy gunner looking directly at the beam. Aside from being unsporting, this is pathetic: lasers are a fifties technology. Phasers that can be set to stun do not appear to be on the drawing boards; and when it comes to infantry combat, the preferred weapon almost everywhere remains the AK-47, a Soviet design named for the year it was introduced: 1947.
The Internet is a remarkable innovation, but all we are talking about is a super-fast and globally accessible combination of library, post office, and mail-order catalogue. Had the Internet been described to a science fiction aficionado in the fifties and sixties and touted as the most dramatic technological achievement since his time, his reaction would have been disappointment. Fifty years and this is the best our scientists managed to come up with? We expected computers that would think!
Overall, levels of research funding have increased dramatically since the seventies. Admittedly, the proportion of that funding that comes from the corporate sector has increased most dramatically, to the point that private enterprise is now funding twice as much research as the government, but the increase is so large that the total amount of government research funding, in real-dollar terms, is much higher than it was in the sixties. “Basic,” “curiosity-driven,” or “blue skies” research—the kind that is not driven by the prospect of any immediate practical application, and that is most likely to lead to unexpected breakthroughs—occupies an ever smaller proportion of the total, though so much money is being thrown around nowadays that overall levels of basic research funding have increased.
Yet most observers agree that the results have been paltry. Certainly we no longer see anything like the continual stream of conceptual revolutions—genetic inheritance, relativity, psychoanalysis, quantum mechanics—that people had grown used to, and even expected, a hundred years before. Why?
Part of the answer has to do with the concentration of resources on a handful of gigantic projects: “big science,” as it has come to be called. The Human Genome Project is often held out as an example. After spending almost three billion dollars and employing thousands of scientists and staff in five different countries, it has mainly served to establish that there isn’t very much to be learned from sequencing genes that’s of much use to anyone else. Even more, the hype and political investment surrounding such projects demonstrate the degree to which even basic research now seems to be driven by political, administrative, and marketing imperatives that make it unlikely anything revolutionary will happen.
Here, our fascination with the mythic origins of Silicon Valley and the Internet has blinded us to what’s really going on. It has allowed us to imagine that research and development is now driven, primarily, by small teams of plucky entrepreneurs, or the sort of decentralized cooperation that creates open-source software. This is not so, even though such research teams are most likely to produce results. Research and development is still driven by giant bureaucratic projects.
What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.
My own knowledge comes from universities, both in the United States and Britain. In both countries, the last thirty years have seen a veritable explosion of the proportion of working hours spent on administrative tasks at the expense of pretty much everything else. In my own university, for instance, we have more administrators than faculty members, and the faculty members, too, are expected to spend at least as much time on administration as on teaching and research combined. The same is true, more or less, at universities worldwide.
The growth of administrative work has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level. What they end up meaning in practice is that everyone winds up spending most of their time trying to sell things: grant proposals; book proposals; assessments of students’ jobs and grant applications; assessments of our colleagues; prospectuses for new interdisciplinary majors; institutes; conference workshops; universities themselves (which have now become brands to be marketed to prospective students or contributors); and so on.
As marketing overwhelms university life, it generates documents about fostering imagination and creativity that might just as well have been designed to strangle imagination and creativity in the cradle. No major new works of social theory have emerged in the United States in the last thirty years. We have been reduced to the equivalent of medieval scholastics, writing endless annotations of French theory from the seventies, despite the guilty awareness that if new incarnations of Gilles Deleuze, Michel Foucault, or Pierre Bourdieu were to appear in the academy today, we would deny them tenure.
There was a time when academia was society’s refuge for the eccentric, brilliant, and impractical. No longer. It is now the domain of professional self-marketers. As a result, in one of the most bizarre fits of social self-destructiveness in history, we seem to have decided we have no place for our eccentric, brilliant, and impractical citizens. Most languish in their mothers’ basements, at best making the occasional, acute intervention on the Internet.
If all this is true in the social sciences, where research is still carried out with minimal overhead largely by individuals, one can imagine how much worse it is for astrophysicists. And, indeed, one astrophysicist, Jonathan Katz, has recently warned students pondering a career in the sciences. Even if you do emerge from the usual decade-long period languishing as someone else’s flunky, he says, you can expect your best ideas to be stymied at every point:
You will spend your time writing proposals rather than doing research. Worse, because your proposals are judged by your competitors, you cannot follow your curiosity, but must spend your effort and talents on anticipating and deflecting criticism rather than on solving the important scientific problems. . . . It is proverbial that original ideas are the kiss of death for a proposal, because they have not yet been proved to work.
That pretty much answers the question of why we don’t have teleportation devices or antigravity shoes. Common sense suggests that if you want to maximize scientific creativity, you find some bright people, give them the resources they need to pursue whatever idea comes into their heads, and then leave them alone. Most will turn up nothing, but one or two may well discover something. But if you want to minimize the possibility of unexpected breakthroughs, tell those same people they will receive no resources at all unless they spend the bulk of their time competing against each other to convince you they know in advance what they are going to discover.
In the natural sciences, to the tyranny of managerialism we can add the privatization of research results. As the British economist David Harvie has reminded us, “open source” research is not new. Scholarly research has always been open source, in the sense that scholars share materials and results. There is competition, certainly, but it is “convivial.” This is no longer true of scientists working in the corporate sector, where findings are jealously guarded, but the spread of the corporate ethos within the academy and research institutes themselves has caused even publicly funded scholars to treat their findings as personal property. Academic publishers ensure that findings that are published are increasingly difficult to access, further enclosing the intellectual commons. As a result, convivial, open-source competition turns into something much more like classic market competition.
There are many forms of privatization, up to and including the simple buying up and suppression of inconvenient discoveries by large corporations fearful of their economic effects. (We cannot know how many synthetic fuel formulae have been bought up and placed in the vaults of oil companies, but it’s hard to imagine nothing like this happens.) More subtle is the way the managerial ethos discourages everything adventurous or quirky, especially if there is no prospect of immediate results. Oddly, the Internet can be part of the problem here. As Neal Stephenson put it:
Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this “new” idea is, in fact, an old one; it—or at least something vaguely similar—has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it’s patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have “first-mover advantage” and will have created “barriers to entry.” The number of seemingly promising ideas that have been crushed in this way must number in the millions.
And so a timid, bureaucratic spirit suffuses every aspect of cultural life. It comes festooned in a language of creativity, initiative, and entrepreneurialism. But the language is meaningless. Those thinkers most likely to make a conceptual breakthrough are the least likely to receive funding, and, if breakthroughs occur, they are not likely to find anyone willing to follow up on their most daring implications.
Giovanni Arrighi has noted that after the South Sea Bubble, British capitalism largely abandoned the corporate form. By the time of the Industrial Revolution, Britain had instead come to rely on a combination of high finance and small family firms—a pattern that held throughout the next century, the period of maximum scientific and technological innovation. (Britain at that time was also notorious for being just as generous to its oddballs and eccentrics as contemporary America is intolerant. A common expedient was to allow them to become rural vicars, who, predictably, became one of the main sources for amateur scientific discoveries.)
Contemporary, bureaucratic corporate capitalism was a creation not of Britain, but of the United States and Germany, the two rival powers that spent the first half of the twentieth century fighting two bloody wars over who would replace Britain as a dominant world power—wars that culminated, appropriately enough, in government-sponsored scientific programs to see who would be the first to discover the atom bomb. It is significant, then, that our current technological stagnation seems to have begun after 1945, when the United States replaced Britain as organizer of the world economy.
Americans do not like to think of themselves as a nation of bureaucrats—quite the opposite—but the moment we stop imagining bureaucracy as a phenomenon limited to government offices, it becomes obvious that this is precisely what we have become. The final victory over the Soviet Union did not lead to the domination of the market, but, in fact, cemented the dominance of conservative managerial elites, corporate bureaucrats who use the pretext of short-term, competitive, bottom-line thinking to squelch anything likely to have revolutionary implications of any kind.
If we do not notice that we live in a bureaucratic society, that is because bureaucratic norms and practices have become so all-pervasive that we cannot see them, or, worse, cannot imagine doing things any other way.
Computers have played a crucial role in this narrowing of our social imaginations. Just as the invention of new forms of industrial automation in the eighteenth and nineteenth centuries had the paradoxical effect of turning more and more of the world’s population into full-time industrial workers, so has all the software designed to save us from administrative responsibilities turned us into part- or full-time administrators. In the same way that university professors seem to feel it is inevitable they will spend more of their time managing grants, so affluent housewives simply accept that they will spend weeks every year filling out forty-page online forms to get their children into grade schools. We all spend increasing amounts of time punching passwords into our phones to manage bank and credit accounts and learning how to perform jobs once performed by travel agents, brokers, and accountants.
Someone once figured out that the average American will spend a cumulative six months of life waiting for traffic lights to change. I don’t know if similar figures are available for how long it takes to fill out forms, but it must be at least as long. No population in the history of the world has spent nearly so much time engaged in paperwork.
In this final, stultifying stage of capitalism, we are moving from poetic technologies to bureaucratic technologies. By poetic technologies I refer to the use of rational and technical means to bring wild fantasies to reality. Poetic technologies, so understood, are as old as civilization. Lewis Mumford noted that the first complex machines were made of people. Egyptian pharaohs were able to build the pyramids only because of their mastery of administrative procedures, which allowed them to develop production-line techniques, dividing up complex tasks into dozens of simple operations and assigning each to one team of workmen—even though they lacked mechanical technology more complex than the inclined plane and lever. Administrative oversight turned armies of peasant farmers into the cogs of a vast machine. Much later, after cogs had been invented, the design of complex machinery elaborated principles originally developed to organize people.
Yet we have seen those machines—whether their moving parts are arms and torsos or pistons, wheels, and springs—being put to work to realize impossible fantasies: cathedrals, moon shots, transcontinental railways. Certainly, poetic technologies had something terrible about them; the poetry is likely to be as much of dark satanic mills as of grace or liberation. But the rational, administrative techniques were always in service to some fantastic end.
From this perspective, all those mad Soviet plans—even if never realized—marked the climax of poetic technologies. What we have now is the reverse. It’s not that vision, creativity, and mad fantasies are no longer encouraged, but that most remain free-floating; there’s no longer even the pretense that they could ever take form or flesh. The greatest and most powerful nation that has ever existed has spent the last decades telling its citizens they can no longer contemplate fantastic collective enterprises, even if—as the environmental crisis demands— the fate of the earth depends on it.
What are the political implications of all this? First of all, we need to rethink some of our most basic assumptions about the nature of capitalism. One is that capitalism is identical with the market, and that both therefore are inimical to bureaucracy, which is supposed to be a creature of the state.
The second assumption is that capitalism is in its nature technologically progressive. It would seem that Marx and Engels, in their giddy enthusiasm for the industrial revolutions of their day, were wrong about this. Or, to be more precise: they were right to insist that the mechanization of industrial production would destroy capitalism; they were wrong to predict that market competition would compel factory owners to mechanize anyway. If it didn’t happen, that is because market competition is not, in fact, as essential to the nature of capitalism as they had assumed. If nothing else, the current form of capitalism, where much of the competition seems to take the form of internal marketing within the bureaucratic structures of large semi-monopolistic enterprises, would come as a complete surprise to them.
Defenders of capitalism make three broad historical claims: first, that it has fostered rapid scientific and technological growth; second, that however much it may throw enormous wealth to a small minority, it does so in such a way as to increase overall prosperity; third, that in doing so, it creates a more secure and democratic world for everyone. It is clear that capitalism is not doing any of these things any longer. In fact, many of its defenders are retreating from claiming that it is a good system and instead falling back on the claim that it is the only possible system—or, at least, the only possible system for a complex, technologically sophisticated society such as our own.
But how could anyone argue that current economic arrangements are also the only ones that will ever be viable under any possible future technological society? The argument is absurd. How could anyone know?
Granted, there are people who take that position—on both ends of the political spectrum. As an anthropologist and anarchist, I encounter anticivilizational types who insist not only that current industrial technology leads only to capitalist-style oppression, but that this must necessarily be true of any future technology as well, and therefore that human liberation can be achieved only by returning to the Stone Age. Most of us are not technological determinists.
But claims for the inevitability of capitalism have to be based on a kind of technological determinism. And for that very reason, if the aim of neoliberal capitalism is to create a world in which no one believes any other economic system could work, then it needs to suppress not just any idea of an inevitable redemptive future, but any radically different technological future. Yet there’s a contradiction. Defenders of capitalism cannot mean to convince us that technological change has ended—since that would mean capitalism is not progressive. No, they mean to convince us that technological progress is indeed continuing, that we do live in a world of wonders, but that those wonders take the form of modest improvements (the latest iPhone!), rumors of inventions about to happen (“I hear they are going to have flying cars pretty soon”), complex ways of juggling information and imagery, and still more complex platforms for filling out of forms.
I do not mean to suggest that neoliberal capitalism—or any other system—can be successful in this regard. First, there’s the problem of trying to convince the world you are leading the way in technological progress when you are holding it back. The United States, with its decaying infrastructure, paralysis in the face of global warming, and symbolically devastating abandonment of its manned space program just as China accelerates its own, is doing a particularly bad public relations job. Second, the pace of change can’t be held back forever. Breakthroughs will happen; inconvenient discoveries cannot be permanently suppressed. Other, less bureaucratized parts of the world—or at least, parts of the world with bureaucracies that are not so hostile to creative thinking—will slowly but inevitably attain the resources required to pick up where the United States and its allies have left off. The Internet does provide opportunities for collaboration and dissemination that may help break us through the wall as well. Where will the breakthrough come? We can’t know. Maybe 3D printing will do what the robot factories were supposed to. Or maybe it will be something else. But it will happen.
About one conclusion we can feel especially confident: it will not happen within the framework of contemporary corporate capitalism—or any form of capitalism. To begin setting up domes on Mars, let alone to develop the means to figure out if there are alien civilizations to contact, we’re going to have to figure out a different economic system. Must the new system take the form of some massive new bureaucracy? Why do we assume it must? Only by breaking up existing bureaucratic structures can we begin. And if we’re going to invent robots that will do our laundry and tidy up the kitchen, then we’re going to have to make sure that whatever replaces capitalism is based on a far more egalitarian distribution of wealth and power—one that no longer contains either the super-rich or the desperately poor willing to do their housework. Only then will technology begin to be marshaled toward human needs. And this is the best reason to break free of the dead hand of the hedge fund managers and the CEOs—to free our fantasies from the screens in which such men have imprisoned them, to let our imaginations once again become a material force in human history.
Aug 12, 2018 | pravdoiskatel77.livejournal.com
The US is preparing a new package of sanctions aimed not only against Russian banks, corporations, businessmen, but also against those who do business with them. The full list of Russian companies is in print, and I do not want to retell for the hundredth time what everyone already knows almost by heart: the names of companies and people's names. The main thing is that all of them are cut off from dollar payments, including financing of new Russian government bonds.
For senior managers of these companies, sitting between two chairs now ended in disaster. Poor Gref (Sberbank chairman) in vain so many years showed loyalty to the USA by not recognizing the Crimea. It did not help. He is in the list. The USA cut Gref with his Bank from the American financial market and does not care one bit that they hurt a deeply pro-American neoliberal comprador.
The Russian financial system, the core of which was that it is a part of world neoliberal financial system run from New York and London, the severing of its connection to the dollar market is a knockdown, if not knockout. And the question is not whether the sanctions will be approved "as is" or somewhat soften, it is clear what size of the suspended axe. Which can sooner or later fall on the heads of our neoliberals, because they are not neoliberal enough and did not depose President Putin. The neoliberal establishment of the USA can press, twist and simultaneously emasculate Trump even more. Trump is very weak, in spite of all the bravado and somewhat improved popularity ratings.
The neoliberal establishment of the USA proved that it can eats even popular presidents. If Trump survives the November midterm Congressional elections, he is highly likely will face even more fierce opposition at the next Presidential election. The "deep state" does not make the same mistake twice.
And then the successor will finish all that Trump failed to finish as for Russian suctions. Russia is facing the complete financial isolation with a ban on the import of modern equipment and export of oil and gas. Ahead drugs and consumer electronics, computers and other products. Those who do not believe in it, do not understand what is happening. Neoliberalism is wounded and like wounded animal attack on its enemies or even detractors with fierce force and determination.
How strong is the shock in the Russian elites from what is happening, shows the performance of Peskov. His reaction reminds us the beginning of the Patriotic war: everyone was waiting for it, but preparations are actually blocked "not to provoke Germans" and no one want to believe when it is started. Remember our pre-war military doctrines? "Fight in a foreign land and with little blood! " In life it turned out a little differently. And only thanks to the fact that sobering up happened quickly, the enemy was stopped near Moscow six months later.
Peskov looks like Molotov of our time. He spoke cautiously in the sense that we do not yet see the react to premature actions. Somebody in the USA really spoke in favor of severe sanctions. When (on August 22) there will be an official decision of our "American partners", then we will talk. And he added that should reassure everyone: "Russia's Financial system is quite stable, it is well known. It has proved its stability in quite difficult times. Against the background of the continuing unpredictability of our overseas partners, of course, we must and we keep our financial system in good condition. It's obvious". It would be better if he said another, very simple idea -- that Russia will adequately respond on all the attacks on its financial system.
Because the tense optimism does not bring calm. What is financial stability, when the rubble dropped more then 10% on the news. Just waiting for the sanctions? Essentially threat to impose those from the State Department on August 22. The ruble as a part of international financial system considerably dropped on the news. Speculators, dominant on the stock exchange and holding this market, began to massively withdraw from ruble assets.
Of course Peskov is still not Putin, he just is the spokesman for the President. Everyone understands that Russian financial system was stable until it was seriously hit. The" tough times" in the past about which Peskov talked were in comparison not that thought. Now we are facing a complete blockade similar to imposed on Japan before Pearl harbor. the design is to provoke us while Russia is still weak after the economic rape of 1990th. The same type of ideas that were behind operation Barbarossa. With the color revolution instead of armed invasion. So why there are people who do not understand this?
Sanctions are just one piece of the puzzle. Background of other action by CIA and NGO. The goal was voiced by some members of the US political elite. Rabid ex-head of the CIA Michael Morell of course behaves much like Zhirinovsky in Russia. With far less originality. But those reservations aside, he probably voiced real intentions of the USA ruling class when he called for "orange revolution" Russia in a manner of EuroMaydan in Ukraine. Which supposedly can be provoked by anti-Russian economic sanctions and economic blockade, which the Congress is in a hurry to adopt.
Everything is very open: sanctions will affect standard of living including decline of real value of pensions (and increase of pension age, already planned), increase is some taxes and prices of staples and communal services. Kind of Ukraine "after-Maydan" scenario without Maydan. At some point this really might take people to the streets. Unpopular reforms are often a desperate reaction of the government to sanctions. All sanctions since Obama's time are aimed at raising the middle class to revolt, and Morell is sure that this is what "Putin is afraid of most." He writes about it in the newspaper the Washington Post in the article "Putin is afraid of one single thing. Let's make him think it can happen." The uprising in Russia might also followed by establishing of another Yeltsin-style puppet regime. Round two of what happened after the dissolution of the USSR. One real problem here is that Putin will last just another six years. Then what? There is no clear mechanism of succession in Russian elite and it can step on the same rake.
That is, the US openly uses the attack on the Russian financial system to organize a coup, a yet another color revolution and bring to power Yeltsin-style puppets. The assurance that our financial system is reliable is an attempt to hide for us the fact how unreliable it is if hit by the USA hard. But if Putin spokesman Peskov does not say it right now, it does not mean that Putin does not see and does not take some actions.
The first step in right direction, forced by the previous round of sanctions was creation of a payment system MIR and an analogue of the SWIFT system. The second is a sharp drop of holding of US treasures. I think that the third necessary step will be the transition step-by-step manner to the nationalization of the top level banks of the Russian financial system -- a measure completely forced by the USA behavior and quite obvious. this can be hidden operation about which nobody should speak too loudly.
I recently wrote that the main feature of the Soviet budget was that it was formed as a result of the confiscation of the free retained earnings balance that arose after the distribution of the planned profit of enterprises, according to the established standards. Thanks to this system, the Soviet budget pulled not only the USSR and its republics, but also half of the world including a dozens of vassals and semi or temporary allies. And the collapse of the USSR happen due to betrayal of the elite, not because of financial problems, although they did existed and at the end of Brezhnev rule became acute. Still it happened mainly because the Soviet nomenklatura wanted privatization, wanted to change sides. It they did not became turncoats, despite all weakness and warts of the Soviet system we probably would still be living in the USSR.
The Soviet financial system was really very stable, because it was protected from the influence of sabotage of the West. Inflation did exist and ruble gradually lost it value during Brezhnev's reign, but that was it. Of course, famous Soviet "deficit" was also a form of inflation, but it was mainly visible in the area of "conspicuous consumption" -- luxury good, electronics and such. With the exception of meat (but not fish) staples were "mostly" available, although "real" prices on "black market" for them often did no correspond to the official prices. The Soviet Union has always, throughout its history lived under the sanctions, if not blockade by the West, but since 1960th population felt the effects only indirectly with severely limited access to Western consumer electronics, low quality and availability of domestic electronics, and such. I am not defending the Soviet system here, I just try to understand the situation.
Unlike the current situation with the ruble in the USSR, the current sanctions are instantly felt, as the exchange rate of the ruble changed and people see that: they feel that they became more poor even if consumer prices did not react. Also the fluctuations of the ruble cause price hikes on imported goods and the risk of bankruptcy of banks. The country's budget to a considerable extent depends on revenues from exports of raw materials such as oil and gas as well (to much lesser extent) as sales of Russian bonds to finance large infrastructure projects. It is wrong to believe that the new US sanctions will hit only the pockets of bankers and top managers. Real economy will also be hit. We are too dependent on imports and the dollar.
I write this to stress that the fact that the nationalization of financial system can take various forms, including the return to the Soviet style limitations on profit of financial institutions and some branches of economics. One step in this direction would be taking 500 billion rubles from the metallurgical and chemical businesses to the state budget. Just like that, no taxes. Advisor to the President Andrei Belousov wrote a letter to President Vladimir Putin, in which he pointed out that in metallurgy and chemistry for 2017, super-profits have accumulated due to the price situation, and not as a result of the actions of the management of companies. The market excess over the average price was 20.8%. Since similar excessive profits in oil industry are withdrawn to the budget in the form of super-income rents, why not do the same with metallurgists and chemists? Putin agreed in writing with Belousov by put a resolution "I Agree" on his memo. This is a socialist redistribution of the state profits of private capitalist enterprises. The NEP in its purest form.
Neoliberals are sad -- not good, they say, not the way "market economy" should work. F*ck them. Shareholders will receive less dividends. But what dividends consideration should be when the country is at war? During the war it should be war economics and it might make sense to return to some USSR practices, as the USSR economics was close to war economics all the time (and it was one on the major drawbacks of "socialist economy").
It is possible, as in the USSR, to take money from business in the form of confiscation by the state of the all of the profits, as many countries do during the war. Of course, this can be only temporary solution, but for several years it will definitely work.
In war, the country, one way or another, puts its economic wagon on the rails of the socialism. First of all, it is the principle of priority of national goals over personal ones. Neoliberals and financial oligarchy during the war are removed from power and, if they resist, of property. So far, they have been removed from part of the profits in two industries. The financial oligarchy is still intact. That needs to change.
But back to neoliberal financial system and banks. Those who are cut off from the dollar-or threaten to cut off with a high degree of probability of this event are now screaming. Let then scream. Sooner or later, but this should happen anyway, and that was clear to anybody expect to comprador financial oligarchy themselves, who enjoyed buying castles, football teams at the West and move their families. Now west will confiscate all those goodies without hesitation as assets created by stealing property in Russia and they can do nothing about it. In the famous film " Liberation " at the end there is a question: "What did fascism bring to the world?". We should also ask ourselves, "What has neoliberalism brought to Russia?".
Neoliberalism impoverished the majority of the Russian population and created a tiny strata of loyal to the USA Russian elite and professionals -- Russian compradors, which preferred to store money in the Western banks. Which currently should be bribed by Putin regime with some possibilities of continued unfair enrichment to keep them quite, so that they do not ally with the USA in case of color revolution, like some Ukrainian oligarchs such as Poroshenko and Kolomoysky did. But this bribery has not turned compradors from fifth column of the West in Russia, into Russian nationalists. They did refrain from revolt in 2011-2012, the USA attempt to stage "white color revolution" in Russia, but they do hate Russia. The problem is that they reproduce themselves, taking control in the field of education, training and placement of personnel in the economy. They also control media.
Neoliberalism has brought Russia's dependence on the export of oil and gas and import of sophisticated production technologies. The raw material elite despises mechanical engineering. Controlling raw materials and finances, she buys equipment in the West, sharing with him part of national resources for the technologies they need. And they take out loans in the West. And move their families to the West. And try to transfer the companies outside Russian jurisdiction. They believe that the elite of the West will be so closely tied to themselves -- here, they say, we will not only share in oil and gas, but we will use your money, your technologies, and we will support your engineering we will not try to replicate them domestically.
Neoliberalism has made Russia dependent on the supply of equipment even for space industry. The dependence is decreasing, but it has become so great that it is not yet possible to get rid of it. Nevertheless, our corporations and key banks for some reason are stuck to the ears in the schemes of pumping money through the United States. What are our military-industrial enterprises doing in the USA? Why they have offshore accounts? What part of this is played by our major banks? As we have recently learned, RosCosmos was stealing money from the state on a truly cosmic scale, and not only money. A lot of components were also bought from Western corporations and sometimes from shady dealers with low quality. And this situation lasts two decades during which it would be possible to create import substitution productions for major components, if desired.
Our civil airliner Superjet, includes a lot of Western components including engines. They can cut supply of them anytime. And no matter how the Ministry of industry and trade is trying to avoid this trap, the neoliberal financial model of Russia does not allow to quickly maneuver resources. It was easy to cut whole plants for scrap metal during economic rape of Russia in the 1990s. But to built a new factory, especially for producing high technology components is much more difficult, especially operating on the destroyed technical and personnel base and brain drain to the West. In the budget formed within the neoliberal paradigm, money for new technologies that is imported from the Wast are never allocated, as this situation is considered "normal". And its normal until the USA decided to put sanctions. After that it nothing close to normal. Also different industries are treated by the state differently. There is huge preference for extractive industries as they bring currency to the budget. When our oil and gas companies suffered financially in 2014-2017, the state came to their aid. Machine builders are not so lucky.
this technological dependence on the west is the most humiliating thing that neoliberals do with the country, that managed to put a man in space just 12 years after the end of the most terrible war. And the USSR did produce some "high-tech" components that now we are buying from the West such as large turbines. Add to this the the US defense specialists freely grazed on our military industrial complex, the crown jewels of Soviet technology, like sheep on a grass common for more then a decade (from 1991 till 2001)
Conversion to Neoliberalism now can turn be very expensive for Russia. How now to buy spare parts for imported aircraft ? How we can lease new aircraft? We have a country in six time zones. All that Putin can now-it is administrative measures to support the remnants of the industry, giving them orders from the Ministry of defense and helping with loans to produce narrow body passenger jets.
But small volumes of narrow body midrange passenger planes are not very profitable and always lose to foreigners who dominate the international market and control most of its volume. Add to this the possibility of kickbacks, corruption, unwillingness to use our own components such as engine. Although we do have aircraft engines are as reasonably quiet and as economical as those we buy in the West.
for example, the newspaper "Argumenty Nedeli" for years writes about the bitter fate of our aircraft engine NK-93, which is competitive with best Western engines and which at all exhibitions are always carefully hidden from Putin somewhere in the distant hangars. The reason is simple -- it is cheap. When you put on a Superjet imported engine you not only simply maintenance of those place in foreign airports, you can launder large sums of budget money. The scheme is simple: the money from the budget -- a contract with a foreign partner via some offshore company and some amounts are rolled back. Minimum of persons involved, maximum benefit. This way from budget to offshore is the shortest. What will happen now with Superjet is unknown. The lion's share of the components are French. It is logical to think about the fate of the Mistral. Or at least supply disruptions.
It is clear that no matter how heavy the costs of us sanctions are for the country, Russian financiers will not give up power they got due to neoliberalization. They will go out of their way to prove that their fate is the fate of Russia, and their death is the death of Russia. And it is necessary to first save them and then Russia. We have seen it many times and we will see it this scenario again and again.
Our largest sectors -- oil, gas, aviation and rocket industry -- also will suffer from the imposition of sanctions. Certainly shipbuilding will suffer. One thing is good that equipment to produce them still can bought in china. But some western technologies are out of reach. China itself buys technologies in America. So we are facing difficult times.
... ... ...
America with its sanctions directly pushes Russia even out of colonial peripheral capitalism. Let's hope that the new unique mixture of capitalism and socialism that will arise in Russia as a result of American sanctions will be a completely different system with completely different elites, whose hatred and distrust of everything Anglo-Saxon will be inherited through genes. And any attempt to bring unnnesary western technologies or products into Russia will be despised. It is reasonable to expect that the new generation of Russian elite is acutely anti-American. Every action generates a reaction. Hopefully sanctions will destroy the "neoliberal intelligentsia" and "neoliberal business elite" in Russia. First of all, the neoliberal financial system will be reformed.
As China under socialist slogans builds capitalism with the Chinese specifics, so Russia under neoliberal slogans will begin to build state capitalism with some socialist component -- with the Russian specifics. And it's not a matter of taste, it's a conscious necessity. Otherwise we simply might not survive. The foundations of the new system will be laid by Vladimir Putin in the struggle for the implementation of the May decrees in conditions for acute geopolitical tension.
I hope that from now on we should not pay any attention to the neoliberal rhetoric of the authorities -- it is the rhetoric of the smoke screen. The usual smoke screen to calm those who will be gradually removed from power and property. Whether they want it or not, Russia has already embarked on this path and hopefully will not be able to get off the neoliberal track. The collapse of neoliberalism in the form of the collapse of its financial system is probably inevitable, and ithe repretition of 2008 is coming. this might help gradually dismantled and change the financial system in the coming years. The global crisis will only help us in this task. The trend is clearly indicated and it can only change speed, but not the direction. Until this moment we need to accept the reality which the USA created with new round of sanctions and do our best to defeat them. They are no longer our partners. They are something else.
Aug 17, 2018 | www.rt.comGet short URL Anti-capitalist protesters in Washington DC © David S. Holloway / AFP Support for capitalism among younger voters has dropped drastically, a new Gallup poll reveals. The US establishment's refusal to see this shift has resulted in Trump's election, philosopher Slavoj Zizek tells RT. According to the poll , 57 percent of Democrats view socialism positively. Only 47 percent view capitalism positively, down from 56 percent in 2010.
Across political lines, young Americans (aged 18-29) in general are split on capitalism and socialism. 51 percent of Americans aged 18-29 view socialism positively, while 45 percent view capitalism positively, down 12 points in just two years.
Slavoj Zizek sees the shift as a realization that for some, the American Dream just isn't real.
"The roots of this disappointment can be easily identified" he told RT. "The working class, but also the middle class feels betrayed. Generally, there's widespread awareness that the American system doesn't function the way people expected it to function."
Curiously, the drop in satisfaction comes at a time when the US economy is booming. Unemployment is at its lowest point in half a century at just over three percent, wages are increasing, and if President Trump is to be believed, all manner of companies are clamoring to bring their manufacturing operations back to the USA from overseas.
In 2010, when more Democrats still trusted capitalism, things were objectively worse. Unemployment stood at a dismal nine percent, wages had stagnated since the great recession, and recovery was still a distant glimmer.
"The message is very hopeful," Zizek said about the poll, which he said shows that quite a large part of the US population "no longer identifies with the American dream." He described the drop in support for Capitalism as the "beginning of the end of what in learned terms we call ideological hegemony."
TV Anchor: It is inexplicable that so many voters have a problem with capitalism considering that for so many Americans
[pauses to check stats]
housing is unaffordable, student debt is skyrocketing & you need a GoFundMe page to afford medical care https://t.co/JxIIZYZ2Du-- David Sirota (@davidsirota) August 13, 2018
With more Americans feeling left behind, the only candidate who capitalized on this dissatisfaction in 2016 was Donald Trump. However, Zizek doesn't see Trump as the solution to America's problems. Even as the economic good times roll, recovery has not touched everyone equally. 40 million US citizens still live in poverty, and five million of these live in "third world conditions," according to a UN report released this June.
"The only thing that can save the US is a stronger, more radical left," Zizek claims.
Where is the left?
The radical left Zizek talks about exists, but has been muscled out by the Democratic party's more centrist establishment. The establishment, he argues, "should look at their own Democratic Party, how they totally ignored a clear, more leftist, anti-capitalist signal from Bernie Sanders and his movement."
Sanders was a popular figure, particularly with young voters. By running Hillary Clinton instead, the centrist establishment "failed the expectations of the American people"
However, since Clinton's miserable performance in 2016, the 'progressive' movement championed by Sanders has slowly seeped into the mainstream. Nowhere was this more apparent than in the Bronx this June, when self-professed 'democratic socialist' Alexandria Ocasio-Cortez snatched a stunning primary victory, ousting ten-term incumbent Rep. Joe Crowley, a more centrist, suit-and-tie Democrat.
Ocasio-Cortez ran on a platform that includes Medicare for all, free college tuition, a $15 minimum wage, and abolishing Immigration and Customs Enforcement – some of these points the Clinton camp of the Democrat party would have considered anathema.
Ocasio-Cortez' victory appeared to lay out a clear roadmap for Democrats in the Trump age: embrace the public's demand for a more radical left and win elections, or continue to blame Russia and continue to lose. The Democratic establishment didn't listen however, with House Minority Leader Nancy Pelosi (California) playing down her victory, reminding voters that it happened in "one district" and warning people not to get "carried away" with progressive ideas.
Assistant Minority Leader James Clyburn (South Carolina) embodied the establishment mentality when he said in an interview that Ocasio-Cortez needs to wait her turn before joining the Democratic party's leadership.
"I would ask her to remember how long I had to wait to get here," the 78-year-old Congressman said.
After her victory, Ocasio-Cortez jetted around the country to drum up support for like-minded progressive candidates ahead of primary elections. Her stumping fell short however, as four out of the six candidates endorsed by the socialist upstart lost their elections.
Some critics put this failure down to an inbuilt 'fear of socialism' among Americans. Zizek disagrees emphatically.
"I don't think that even those who spread this fear, that they take it seriously," he said, adding that the US is unlikely to turn into Venezuela any time soon. "That's pure fear-mongering" and "panicky reaction" at the newfound popularity of socialism, he said.
If the trend revealed by the latest Gallup poll is correct, embracing a socialist message could soon be the Democratic party's only means of survival.
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Aug 14, 2018 | www.defenddemocracy.press
World acclaimed Marxist thinker Samir Amin dies
In an interview with Ahram Online in 2012 Samir Amin said that he believes that "this neo-liberal phase is in state of collapse. It doesn't mean that capitalism is collapsing; but that its current form is collapsing and we're entering a new phase. It has to adapt, and whether the new system will be biased to the ruling class or the masses, is still be revealed."
Aug 14, 2018 | russia-insider.com
Tharoor quotes from New York Times columnist David Brooks who concluded that Trump's behavior was that "of a man who wants the alliance to fail." He quotes extensively from Guy Verhofstadt, a former Belgian prime minister and leader of the Liberal political fraction in the European Parliament fighting for a much more integrated EU, who sees Trump as the enemy of liberal internationalism and ally of his own alt right enemies in Europe.
Tharoor also brings into play Martin Wolf of the Financial Times , who delivered a scathing attack on Trump for his rejection of the West: " today the U.S. president appears hostile to core American values of democracy, freedom and the rule of law; he feels no loyalty to allies; he rejects open markets; and he despises international institutions."
In the 23 July issue of "Today's World View," Tharoor takes advantage of the time gone by since Helsinki to refine the conclusions. He offers a pithy commentary from Susan Glasser of The New Yorker : "We are witnessing nothing less than the breakdown of American foreign policy."
In the same issue, Tharoor notes that public reaction to Trump in Helsinki is less pronounced than one might suppose from reading the pundits. He offers the following remarks of colleagues on the results of a recent poll: "Most Americans do not feel Trump went 'too far' in supporting Puitn, and while more Americans say U.S. leadership has gotten weaker than stronger under Trump, his ratings on this question are slightly improved from last fall."
If we go back in time to the days following Trump's visit to the NATO gathering in Brussels, we find in the headlines of the 11 July issue another take on what Trump is doing:
"Trump's NATO trip shows 'America First' is 'America Alone.'"
Here we read about Trump's insistence that America "stop footing Europe's bill" for its defense, namely his demand that all NATO allies pay up 2% of GDP at once, not in the remote future; and that they prepare to double that to 4% very quickly. By intentional abrasiveness, these moves by Trump are, Tharoor tells us, "undercutting the post-World War II order in pursuit of short-term, and likely illusory, wins."
All of these comments address the question of what Trump opposes. However, Tharoor is unable to say what, if anything, Trump stands for. There are only hints: continued US hegemony but without the ideological cover; might makes right; nationalism and the disputes that lead to war.
Does this make sense? Or is it just another way of saying that Trump's foreign policy stance is an inconsistent patchwork, illogical and doomed to fail while causing much pain and destruction along the way?
I fully agree with the proposition that Donald Trump is ripping up the post-Cold War international order and is seeking to end NATO and the rest of the alliance system by which the United States has maintained its global hegemony for decades. But I believe this destructive side is guided by a creative vision of where he wants to take US foreign policy.
This new foreign policy of Donald Trump is based on an uncompromising reading of the teachings of the Realist School of international affairs, such as we have not seen since the days of President Teddy Roosevelt, who was its greatest practitioner in US history.
This is not isolationism, because Trump is acting to defend what he sees as US national interests in foreign trade everywhere and in geopolitics in one or another part of the world. However, it is a world in which the US is cut free from the obligations of its alliances which entail maintenance of overseas bases everywhere at the cost of more than half its defense budget. He wants to end the risks of being embroiled in regional wars that serve our proxies, not core US national interests. And he is persuaded that by a further build-up of military might at home, by adding new hi-tech materiel the US can secure its interests abroad best of all.
I reach these conclusions from the snippets of Trump remarks which appear in the newspapers of daily record but are intentionally left as unrelated and anecdotal, whereas when slotted together they establish the rudiments of an integrated worldview and policy.
For example, I take his isolated remark that the United States should not be prepared to go to war to defend Montenegro, which recently passed NATO accession, because Montenegro had been a trouble-maker in the past. That remark underwent virtually no analysis in the media, though it could be made only by someone who understood, remarkably, the role of Montenegro at the Russian imperial court of Nicholas II precisely as "troublemaker," whose dynastic family aided in their own small way the onset of WWI.
Donald Trump is not a public speaker. He is not an intellectual. We cannot expect him to issue some "Trump Doctrine" setting out his Realist conception of the geopolitical landscape. All we get is Tweets. This inarticulate side of Trump has been used by his enemies to argue he has no policy.
In fact, Trump is the only Realist on the landscape.
Going back to 2016, I thought he was being guided by Henry Kissinger during the campaign and then in the first months of his presidency, I misjudged entirely. Trump is true to the underlying principles of Realism without compromise, whereas Henry K. made his peace with the prevailing Wilsonian Idealism of the American Establishment a couple of decades ago in order to remain welcome in the Oval Office and not to be entirely marginalized.
Trump's vision of Realism draws from the source in the Treaty of Westphalia, 1648 with its guiding concept of sovereign nation-states that do not intervene in others' domestic affairs. It further draws on the notions of raison d'état or national interest developed by the French court of Louis XIV and then taken further by "perfidious Albion" in the eighteenth century, with temporary and ever changing combinations of states in balance of power realignments of competitors. The history of the Realist School was set out magnificently by Kissinger in his 1994 work Diplomacy . It is a pity that the master himself strayed from true and narrow.
In all of this, you have the formula for Trump's respect, even admiration for Putin, since that also is now Vladimir Vladimirovich's concept of Russia's way forward: as a strong sovereign state that sets its own course without the constraints of alliances and based on its own military might.
The incredible thing is how a man with such poor communication skills, a man who does not read much came to such an integrated vision that outstrips the conceptual abilities of his enemies, his friends and everyone in between.
We are tempted to look for a mentor, and one who comes to mind is Steve Bannon, who is very articulate, razor-sharp in his intellect and who provided Trump with much of the domestic content of his 2016 campaign from the alt right playbook. And though Bannon publicly broke with Trump in their falling out over his ever diminishing role in the Administration, Bannon's ongoing project, in particular his Movement to influence European politics and shift it to the Right by coordinating activities across the Continent during the parliamentary elections of May 2019, very closely parallel what Trump's ambassador in Berlin seems to be doing in Trump's name.
It may well be that the President and his confidantes find it prudent for him to play the hapless fool, the clueless disrupter of the global political landscape until he has the support in Congress to roll out the new foreign policy that is now in gestation.
The logical consequence of such a Realist approach to foreign policy will be to reach an understanding with the world's other two principal military powers, Russia and China, regarding respective spheres of influence in their geographic proximity. But I do not believe we will see a G-3 succeeding America's unipolar moment. Given the predispositions of both Russia and China, we are more likely to see a broader board of governors of global policy in the form of the G-20, ushering in the multipolar age. In such a formulation, regional conflicts will be settled locally by the interested parties and with the major powers involved only as facilitators, not parties to conflict. That promises a much more stable and peaceful future, something which none of Donald Trump's detractors can begin to imagine as his legacy.
Gilbert Doctorow is an independent political analyst based in Brussels. His latest book, "Does the United States Have a Future?" was published on 12 October 2017. Both paperback and e-book versions are available for purchase on http://www.amazon.com and all affiliated Amazon websites worldwide. See the recent professional review http://theduran.com/does-the-united-states-have-a-future-a-new-book-by-gilbert-doctorow-review/ For a video of the book presentation made at the National Press Club, Washington, D.C. on 7 December 2017 see https://www.youtube.com/watch?v=ciW4yod8upg
Aug 13, 2018 | roacheforque.blogspot.com
Sunday, August 12, 2018 Back That A$$et Up ... From the first sentence of Michael Sproul's There's No Such Thing as Fiat Money (2007) :I make the claim that fiat money does not exist, and that the money that is commonly called fiat money is actually backed by the assets of its issuer.Who would argue against the premise that modern currencies are backed by the issuer's assets? The questions that remain are: How broad a definition of "assets" is being considered? And does "asset backing" justifiably negate the meaning of "fiat", or is this mere semantics?
In any event, I would counter argue that the meaning of "fiat" is possibly in need of clarification. And such clarification would then allow for the sensible conclusion that fiat money does indeed exist. Sproul's premise is a good launch pad for clarifying just what it is that backs the US Dollar.
Many have said that the US military "backs" the dollar. And indeed, the US Deep State and its Military Industrial Corporatist alliance represents a huge investment in strategic worldwide military deployment. That investment is an asset, and it does in part back the dollar. There are other factors, that are considered in the foreign exchange marketplace, and there are varying opinions as to which factors bear such weight upon the prime factor : relative changes in purchasing power.
As we have discussed before, usage is a considerable factor in determining a currency's relative purchasing power, which in turn supports further usage, in a circular fashion. In times past, there were set fundamentals that established relative fiat currency exchange value: the country's stability, its industrial base, trade practices and metrics, population demographics and economic condition, debt to GDP, and so on.
As our real world has progressed into a world of derivative statistic and valuation, through the rise of financialization, those fundamental factors have evolved to include other factors that are brought to bear upon a modern digital currency's backing.
Does the depth of a currency in global derivative positions act as a form of backing? This is a factor which did not exist prior to the existence of derivatives. Does that depth not guarantee further usage, and that further usage not create greater depth? Does the currency function successfully as a systemic weapon against other currency issuers? Again, relatively recent dollar era phenomena.
But there is an incredibly powerful, hugely overlooked factor which begins only around 2008, which backs the US dollar. I will tell you now that it is the US Government's control over its people which gives the US dollar the largest share of "asset backing" of any other factor under consideration - in the FX market and otherwise.
When the US Government publicly bailed out the global banking system and made the American people the guarantor of that bailout, an incredible precedent was set. It proved to the families that the issuer of the US Dollar could obligate its tax base to an unrepayable debt, and that tax base would neither understand, nor care enough about the consequences of that precedent ... to stand up and fight against the fraud and thievery that keeps the 99% in perpetual bondage, and the 1% in a risk free position to do as they please.
The issuer has proven to generational wealth that it can divert the attention of the tax base from the world's most egregious robbery, and do it again every so often, including to other middle classes who hold wealth, as it moves from country to country. And they will do so in equally powerful police states, combined with well developed welfare states, as the fiat wealth concept manages the debt slaves of any culture, keeping them pacified under the doctrine of "debt as wealth".
You will watch in amazement as China eventually "becomes" the USA in this regard. To the North, there is one proud people, who thrive on the adversity which shapes their strong cultural identity - who will be a thorn in the dollar's side - but they will be dealt with, as opportunity allows.
This modern state of affairs is an incredible asset which the global corporatist banking cartel (the BIS led global central banking system) has endowed upon the US Dollar - and it's rival issuers are part and parcel to that system. Until China, India and Russia's central banks (along with their strategic but smaller allied CBs) achieve a true Coup d'etat (either publicly - or more likely privately) and begin to act independently from BIS mandate, the world's middle classes will never have any enduring prosperity - only the fleeting type that comes with targeted booms, busts and the fraud and bailouts they enable.
Much more importantly ... that Coup will NEVER HAPPEN as long as the American people agree to the dollar contract they are so deeply sworn to. Americans have been taught to accept the double standard they now live by. They can default on debt and lose everything they own, but their lenders can never default - they will be bailed out by whatever wealth remains. There is no other society on earth who have been so culturally conditioned to accept slavery and socialism as the generation of Americans whose OBEDIENCE backs the dollar today. That compliance, coupled with contempt for the wealth of their fellow man, and the social justice herd mentality, makes the family's smile with exceeding confidence ... that this dollar empire can milk much more middle class wealth across the globe as it spreads its "debt as wealth" religion even further into systemic entrenchment.
And this Trump fellow. He and Wilbur are doing well to earn the trust of generational wealth.
An unexpected wildcard can always be drawn, including an international war. But the Roacheforque's will profit from war as well - nonetheless, and just the same. Generational wealth aways profits from the spread of global corporatism, as they are both the authors and benefactors of it.
This we learn ... from the flower of understanding.
https://i.ytimg.com/vi/tuzJadb4vm8/0.jpgRoacheforque at 1:47 PM Email This BlogThis! Share to Twitter Share to Facebook Share to Pinterest
Aug 12, 2018 | crookedtimber.org
likbez 08.11.18 at 7:52 pm 11
Still, to the extent that Trumpism has any economic policy content it's the idea that a package of immigration restrictions and corporate tax cuts will make workers better off by reducing competition from migrants and increasing labor demand from corporations.
The emergence of Trumpism signifies deepening of the ideological crisis for the neoliberalism. Neoclassical economics fell like a house of cards.
IMHO Trumpism can be viewed as a kind of "national neoliberalism" which presuppose rejection of three dogmas of "classic neoliberalism":
1. Rejection of neoliberal globalization including, but not limited to, free movement of labor. Attempt to protect domestic industries via tariff barriers.
2. Rejection of excessive financialization and primacy of financial oligarchy Restoration of the status of manufacturing, and "traditional capitalists" status in comparison with financial oligarchy.
3. Rejection of austerity. An attempt to fight "secular stagnation" via Military Keysianism.
Trumpism sent "Chicago school" line of thinking to the dustbin of history. It exposed neoliberal economists as agents of financial oligarchy and "Enemy of the American People" (famous Trump phase about neoliberal MSM).
See, for example, a good summary by Sanjay Reddy ( Associate Professor of Economics, The New School for Social Research) at https://www.nakedcapitalism.com/2016/11/trumpism-has-dealt-a-mortal-blow-to-orthodox-economics-and-social-science.html
It is never clear whether ideas or interests are the prime mover in shaping historical events, but only ideas and interests together can sustain a ruling consensus for a lengthy interval, such as the historic period of financialization and globalization running over the last 35 years. The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas.
First, there is globalization as we knew it. Mainstream economics championed corporate-friendly trade and investment agreements to increase prosperity, and provided the intellectual framework for multilateral trade agreements.
Second, there is financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class.
Financialization also led to the near-abandonment of the 'national' industrial economy in favor of global sourcing and sales, and a handsome financial rentier economy built on top of it. Meanwhile, automation trends led to shedding of jobs everywhere, and threaten far more.
All of this was hardly noticed by the discipline charged with studying the economy. Indeed, it actively provided rationales for financialization, in the form of the efficient-markets hypothesis and related ideas; for concentration of capital through mergers and acquisitions in the form of contestable-markets theory; for the gentrification of the city through attacks on rent control and other urban policies; for remaking of labor markets through the idea that unemployment was primarily a reflection of voluntary leisure preferences, etc. The mainstream political parties, including those historically representing the working and middle classes, in thrall to the 'scientific' sheen of market fetishism, gambled that they could redistribute a share of the promised gains and thus embraced policies the effect of which was ultimately to abandon and to antagonize a large section of their electorate.
Third, there is the push for austerity, a recurrent trope of the 'neoliberal' era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance (though they can paradoxically simultaneously disdain taxation, as with Trumpism). The often faulty intellectual case made by many mainstream economists for central bank independence, inflation targeting, debt sustainability thresholds, the distortive character of taxation and the superiority of private provision of services including for health, education and welfare, have helped to support antagonism to governmental activity. Within this perspective, there is limited room for fiscal or even monetary stimulus, or for any direct governmental role in service provision, even in the form of productivity-enhancing investments. It is only the failure fully to overcome the shipwreck of 2008 that has caused some cracks in the edifice.
The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.]
Finally, interpretations of politics were too restrictive, conceptualizing citizens' political choices as based on instrumental and usually economic calculations, while indulging in a wishful account of their actual conditions -- for instance, focusing on low measured unemployment, but ignoring measures of distress and insecurity, or the indignity of living in hollowed-out communities.
Mainstream accounts of politics recognized the role of identities in the form of wooden theories of group mobilization or of demands for representation. However, the psychological and charismatic elements, which can give rise to moments of 'phase transition' in politics, were altogether neglected, and the role of social media and other new methods in politics hardly registered. As new political movements (such as the Tea Party and Trumpism in the U.S.) emerged across the world, these were deemed 'populist' -- both an admission of the analysts' lack of explanation, and a token of disdain. The essential feature of such movements -- the obscurantism that allows them to offer many things to many people, inconsistently and unaccountably, while serving some interests more than others -- was little explored. The failures can be piled one upon the other. No amount of quantitative data provided by polling, 'big data', or other techniques comprehended what might be captured through open-eyed experiential narratives. It is evident that there is a need for forms of understanding that can comprehend the currents within the human person, and go beyond shallow empiricism. Mainstream social science has offered few if any resources to understand, let alone challenge, illiberal majoritarianism, now a world-remaking phenomenon.
nastywoman 08.12.18 at 4:11 am 16and about@11
"for instance, focusing on low measured unemployment, but ignoring measures of distress and insecurity, or the indignity of living in hollowed-out communities".
How true – how true –
(and didn't I write that when Von Clownstick won? – and hardly anybody in economics believed it?)
and then there is this:
– "financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class".
So we might have to talk one day about if it truly is "obvious enough by now that support for Trumpism in the US and elsewhere is motivated primarily by racial and cultural animus, and not (or at least not in any direct way) by economic concerns"??
Aug 12, 2018 | caucus99percent.com
Not Henry Kissinger on Thu, 08/09/2018 - 1:35pmJekyllnHyde on Thu, 08/09/2018 - 2:00pmOne of FDR's Best Speeches
@Not Henry Kissinger
Franklin Roosevelt's Address Announcing the Second New Deal - October 31, 1936
Aug 08, 2018 | eand.co
[Umair Haque, Medium ].
"Liberalism, once a great and noble philosophy, split into three factions -- neoliberalism, libertarianism, and "classical liberalism" (I'll come back to that one). These factions, like stone age tribesmen gleefully performing a lobotomy, hacked and chopped away at liberalism, blow by crushing blow, until all that was left was a drooling, snarling, spitting, twitching zombie: predatory capitalism [P]redatory capitalism created a class of oligarchs richer than the kings of yore -- and in many ways, more powerful, too. Untouchable, above the law, beyond reproach. The wealthier this class of ultra-rich got, the more that the middle and working class collapsed. Inequality spiraled out of control. People lost faith in all the great liberal institutions -- law, rights, constitutions, knowledge, democracy itself -- because it seemed that the only real purpose of those institutions was to allow the ultra-rich to prey on the poor, exacting crippling tribute for the most basic of things. Not paid in wheat or silver, but cold, hard, cash. Insulin that costs $1000? Childbirth that costs $30K? These three factions made liberalism self-destruct -- by turning it into a mechanism for the one exact thing, a millennium or so ago, it was created to destroy: feudal, dynastic, untouchable, predatory elites skimming off an economy's surplus, amassing all a society's wealth for themselves." • Not the sort of thing one expects from the one-time most popular author at the Harvard Business Review . The waters must have risen higher than I thought.
Aug 08, 2018 | peakoilbarrel.com
Guym says: 08/06/2018 at 8:58 amEarlier estimates of OPEC have now changed, and there is no increase from June. Probably, a slight decrease from SA. From OPEC sources, not Platts. I think they would start increasing if Iran drops, but not much otherwise. I think Sauds and Kuwait joint venture is set up for that potential.Energy News says: 08/06/2018 at 11:07 am
Changing the way I gage things, into a much simpler format. Now, I look at world inventory drops, and look at current increases from OPEC and US. Neither will change much, so inventory drops should continue. Opec needs to come up with a lot more, or it will look damn scary in 2019. With pipeline constraints, Canada is pretty much out of the picture for further increases this year, and not much, elsewhere.Yes the outlook for OPEC's July production is looking more flat now. This is a strange situation because Platts is one of OPEC secondary sources and so I assume that they see all the numberskolbeinh says: 08/06/2018 at 11:54 am
Argus – Surprise Saudi decline depresses Opec output
Yes all the tanker trackers are saying that OPEC exports fell in July, this is Reuters version
Reuters on Twitter: https://pbs.twimg.com/media/Dj541N2WwAAy55o.pngThe Platts vs Argus divergence is for sure strange. It is easier to track exports than production numbers.Monsieur George says: 08/06/2018 at 11:57 amThank you. This news confirms that world production is stagnating. Possibly very close to the decline. We will have to be attentive to the inventories. It will be the first place that the nations get hold of in order to supply themselves with oil.
Jun 12, 2016 | www.youtube.com
What we have is state funded capitalism
The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear. ANTONIO GRAMSCI (1891-1937). ITALIAN MARXIST THEORIST & POLITICIAN
In the first episode of 'On Contact', host Chris Hedges discusses the global revolt against corporate capitalism with radical intellectual and author Tariq Ali. Ali talks about how the world banking system got Greece and other European countries in trouble, and how big capital may be behind the impeachment of Brazilian president Dilma Rousseff. RT Correspondent Anya Parampil joins the show with a report on global inequality.
minivanjack , 2 years agoNATURAL LAW , 2 years ago
So, Chris, "open markets" which USA has not seen a trace of for over 100 years are a "failure" and we are "doomed" unless we have a politburo of corruptible socialist elites determining "policy" for industries and enterprises they know nothing about? I believe that any great thinker or genius can become fixated on a false prize and all of the genius is diverted, perverted to a futile cyclical cry for "justice" based on an unsupported ideological dream, not any pragmatic vision.mastertheillusion , 2 years ago
"Corporate Capitalism" ? Why do people refuse to see that this is a Natural progression of Capitalism. Whether it's Corporations, Governments, Banks or Elites, the inner workings & outline of this type of System creates Inevitable Stratification of Power & Wealth. The Incentives have Always been there for this to eventually to take place. NLRBE!Michael David , 2 years ago
Capitalism in and of itself fosters overwhelming greed. We need a new model for the whole planet that evens the playing field for every human being in existence. We need a fusion of the best for what is next.conservativeautocrat , 2 years ago
Chris, the system we now have is a Corporatist State which is a fascist system. The radical left can't distinguish between Nationalist and Fascist. The radical Left are not nationalists they are globalist and peddle cultural Marxism!Semantics Simple , 2 years ago
I very much understand the need to fight against the international banking system that has been making a mess of things,but I don't understand the continuing blaming of the philosophical worldviews of fascism and national socialism which have not been put into political practice since the middle of the 20th century. Both the political practices of capitalism and communism are the ideas that have had a major influence on the whole entire world since the end of World War II that have been making a mess of the world on so many levels. It's so completely ridiculous for these people to think that communism will work out so great for them and can't realize that it works against them. As Jewish philosopher Karl Marx had said "What is the real basis of the Jewish religion ? Practice need,egoism. The God of practice need and egoism is money. Money is the jealous God of Israel before whom no other God may endure. Money debases all gods of men and transforms them into commodities. The God of the Jews has become the God of the universe. The real God of the Jews is money. Their God is only an illusory bill of exchange". This is what the founder of communism himself had said and these people have admireration for the worldview of communism and they have major attitudes and problems with the ideas of fascism,national socialism and other true nationalist worldviews who's main concerns is to be in the service of the nation and people and by fighting against the power of the international banking system.Fred Dietz , 2 years ago (edited)
There is no capitalism in this world. There is no such thing as too big to fail in a capitalist system. There is no such thing as bank bailouts. There is no such thing as bailing out auto companies or any big corporation. In a capitalist system the market determines interest rates not a privately owned central bank. In a capitalist system all those bank's that took on unrealistic risk would have failed, instead they got to keep all their profit and we the taxpayer got to cover their losses. In a capitalist system the bank's that only took on manageable risk would have greatly benefited from the greed and failure of the others. Our system is fascist pure and simple, the merger of state and corporate powers.Jean-Pierre Delorraine , 2 years ago
With the American left, I don't know what's going on with Bernie Sanders anymore. I don't think he knows. I think he's getting pulled in separate directions -- one, by his campaign insiders who have their own careers in the Democratic Party to consider, and the other by his supporters in the general public who don't care about "Democratic Party" or necessarily any other party. There's now a Huffington Post story of Bernie Sanders scheduled to meet with Hillary next week -- meet with the war-hungry corporate interventionist, the war goddess herself. And if Bernie lets himself get assimilated into Hillary's campaign, that's it -- his credibility is shot. Meanwhile, the corporate press is having a field-day with all of this. You know, if you were some bigwig of ABC or CBS, this would have to be your "day in the sun" -- you couldn't hope for a better chain of events than those of the past 2 months. And throughout the American public there's complacency and acquiescence -- even though now were left with 2 Wall Street representatives to choose from for our nation's highest office. And what's our avg household debt, mortgages included -- something like $140,000 per household? You have an American public that cannot even think without Wall Street telling them what to think about, care about and believe in. I don't see this ending well for us.Parfour80 #pro , 3 months ago
Capitalism IS fascism and indeed diametrically opposed to any form of democracy. Additionally, calling current nationalist movements in Europe fascist, especially those in Germany, France and Spain, is completely off base. There are brown skinned Europeans who proudly support the Front National in France for example. It is not a racist platform.MrFraterManifesto , 2 years ago
85% of the profits are going to the top 1%. 50% of the workforce are paycheck to paycheck or Worse. Then The payday Lenders finish off the working Class.Ruby Honey , 9 months ago
I find Tariq Ali a great thinker and eloquent speaker and author. However, as an example of just how 'tight a grip' corrupt capitalism has 'on all the global institutions' - in this case, education - I find it interesting how a man, who simply offers us contemporary examples of the never - ending struggle between the 'Haves' and the 'Have Nots,' is now referred to as a, "Radical Intellectual." This struggle has only been going on since the Bronze Age. It would seem humankind would've found a solution to it by now.
Liberalism is the ideology of western suicide`` James Burnham 1964
Jul 07, 2018 | www.youtube.com
Economist Richard Wolff discusses the coming economic collapse of the United States of America with journalist Chris Hedges.
Find RT America in your area: http://rt.com/where-to-watch/
Or watch us online: http://rt.com/on-air/rt-america-air/
Like us on Facebook http://www.facebook.com/RTAmerica
Follow us on Twitter http://twitter.com/RT_AmericaCategoryNews & Politics Comments • 2,483 Add a public comment...
Gina Chu Cheong , 3 weeks agoRichard Mays , 3 weeks ago
American citizens were asleep and did nothing and took it, and took it and took it. You guys did not understand that The President and Congress work for you, you treat them like Gods and they behave the way you treat them. So take some of the blame, Evil thrives where Good men do nothing, and you did nothing.408Magenta , 3 weeks ago (edited)
Capitalism was allowed to become unfettered via the corruption of government. So called, Democracy has an enabling role here. We the People are the only ones who can stop this.PoppONaya Shelly , 3 weeks ago
(((Wolff))) is telling something we don't ALL see?? Don't forget to buy the book.workwillfreeyou , 3 weeks ago
time to jail the CEOs and seize ALL of their propertyAl Demir , 3 weeks ago
Except now the U.S. Government/Big Pharma has 2/3 of the population on antidepressants and antipsychotic dope. I hope all of the Big Pharma executives children end up on their parents dope.Asibi .S , 3 weeks ago (edited)
nothing will grow without soil of the earth, capitalism will not survive without the main stream and the working class of people.Aarc Vault , 3 weeks ago (edited)
Empires rise and decline like everything in life !?
What Mr. Wolff characterizes as "Capitalism" is in fact Fascism (merger of Private and State interests; PRIVATE companies/corporations subsisting SOLELY upon GOVERNMENT contracts. The Federal Reserve, for instance.). Why Wolff continues to stop just short of this correct designation in his otherwise competent Economic critique remains a mystery. He certainly KNOWS the difference, so I can only assume that he wishes to remain employed......................... -Cheers!
Jul 10, 2018 | failedevolution.blogspot.com
In another interesting interview with Chris Hedges, Richard Wolff explains why the Trump presidency is the last resort of a system that is about to collapse:
Finally, if everybody tries to save themselves (protection), we have a historical example: after the Great Depression that happened in Europe. And most people believe that it was a large part of what led to WWII after WWI, rather than a much saner collective effort. But capitalism doesn't go for collective efforts, it tends to destroy itself by its own mechanisms. There has to be a movement from below. Otherwise, there is no counter force that can take us in another direction.
So, absent that counter force we are going to see this system spinning out of control and destroying itself in the very way its critics have for so long foreseen it well might.
When Trump announced his big tariffs on China, we saw the stock market dropped 700 points in a day. That's a sign of the anxiety, the danger, even in the minds of capitalists, about where this is going. If we hadn't been a country with two or three decades of a middle class - working class paid really well - maybe we could have gotten away with this. But in a society that has celebrated its capacity to do what it now fails to do, you have an explosive situation.
Everything is done to avoid asking the question to what degree the system we have in place - capitalism is its name - is the problem. It's the Russians, it's the immigrants, it's the tariffs, it's anything else, even the pornstar, to distract us from the debate we need to have had that we haven't had for a half a century, which puts us in a very bad place. We've given a free pass to a capitalist system because we've been afraid to debate it. And when you give a free pass to any institution you create the conditions for it to rot, right behind the facade.
The Trump presidency is the last gasp, it's letting it all hang out. A [neoliberal] system that's gonna do whatever it can, take advantage of this moment, grab it all before it disappears.
In France, it was said 'Après moi, le déluge' (after me the catastrophe). The storm will break.
Aug 03, 2018 | www.nakedcapitalism.com
Marco Saba , August 2, 2018 at 6:11 pm
It seems that bad debts can be composed with fake liabilities, here:
The "accounting view" of money: money as equity (Part I)
The "accounting view" of money: money as equity (Part II)
The "accounting view" of money: money as equity (Part III)
Feb 04, 2013 | www.amazon.com
Hans G. Despain 5.0 out of 5 starsUnique and Stimulating Account of the Great Financial Recession of 2008
This book can be highly recommended as a book on the Great Financial Crisis of 2008, and a book of politics, political economy, class analysis, sociology, and history. Very impressive accomplishment.
The strength of this book on the Great Financial Crisis of 2008 is that Dumenil and Levy place the crisis in a larger historical perspective. They maintain it is a mistake to isolate it merely in the context of the financial innovation and deregulation occurring from the late 1990s. Instead, capitalism has particular historical tendencies and specific class relations.
This is a very impressive volume published by Harvard University Press. It offers a play by play of the Great Financial Recession of 2008, beginning from 2000 in chapters 12 - 17, the political response and the continued stagnation in domestic economies and instability within the international economic order in chapters 18 - 20, along with very interesting historical policy observations and recommendations for this current crisis in chapters 21 - 25. Nonetheless the real power of this book occurs in its historical analysis of capitalist development since 1970s described in great detail in chapters 1 - 11.
According to Dumenil and Levy the historical tendencies of capitalism are radically mediated by politics and social class configurations (i.e. alliances). They argue capitalistic development, since 1880s, has gone through four primary stages and corresponding crises. They emphasize these developments are not historically necessary, but contingent on politics and social class configurations. Moreover, their analysis is particular to the capitalistic development in the United States and Western Europe, they are able to generalize or internationalize their analysis because of the U.S. global hegemony (although they certainly accept there are modes of resisting this hegemony (e.g. Iran, Venezuela, Cuba, China, etc.)).
Dumenil and Levy have demonstrated in previous work the tendency of the rate of profit to fall in capitalistic economies. However, because politics and social class alliances can change, so can the profitability. The current crisis was not caused by falling rates of profits, but by financial innovation, credit overextension, and the particular social class alliances facilitating these activities. There is no single cause of the crisis, but broader social political mechanisms at work and in the process of transformation.
The basic story goes like this: following the Great Depression of 1930 a strong social political alliance emerged between the management class and "popular classes" (this popular class includes blue and white collar workers, including quasi-management, clerical, and professional, which cannot be reduced to the traditional "working-class"). In the 1970s there was a severe profitability crisis, the legislative and institutional response to this crisis caused a fracture between management and popular classes, and a re-alliance between management and capitalist classes (which includes ownership and financial classes).
Once the alliance between capitalist classes and management had been forged in late 1970s and 1980s, profitability returned and financial incentives and financial innovation reconfigured personal incentives and corporate motivations. Most important according to Dumenil and Levy is that these historical transformations manifested a "divorce" between ownership/finance and the domestic economy and its actual production process. The political system did nothing to reconcile this disconnect, indeed expedited the divorce via deregulation and financial innovation, what the economic literature calls "financialization" (although, to repeat in several countries the response was radically different and in specific opposition to U.S. hegemony and the neo-liberalism which the U.S. Treasury, IMF, World Bank, and WTO exported to the rest of the world).
This is a very tightly and elegantly argued book. It has a huge advantage over other books on the Great Financial Crisis of neoliberalism in that it places the crisis in both an historical and socio-political perspective. Further they provide the political implications, or what is to be done.
Dumenil and Levy maintain the current system, especially the "divorce" between the ownership/financial and the domestic economy, is not economically sustainable. Hence is also not political sustainable. Thus, they suggest several political possibilities that could manifest. However, they advocate an alliance between the "popular classes" and management (reminiscent of the New Deal/Fair Deal alliances). Nonetheless, it does not yet appear management has the political incentives to agree to forge such an alliance.
This book will have a hard time finding its audience. Mainstream audiences will charge Dumenil and Levy with being overly Marxist, while Marxists will complain they deviate too far from classical Marxism. Nonetheless this is political economy at its best. This book deserves a wide audience and Dumenil and Levy deserve credit for the construction of a unique and stimulating account of the Great Financial Recession of 2008.
Jul 29, 2018 | peakoilbarrel.com
Ron Patterson says: 07/28/2018 at 12:40 pm
Behind a paywall but here is the gist of the article
WSJ: As Oil Industry Recovers From a Glut, a Supply Crunch Might Be Looming
Dearth of investments in oil projects mean a spike in prices above $100 could be on the horizon
Crude across the globe is being used up faster than it is being replaced, raising the prospect of even higher oil prices in the coming years.
The world isn't running out of oil. Rather, energy companies and petro-states -- burned by 2014's price collapse -- are spending less on new projects, even though oil prices have more than doubled since 2016. That has sparked concerns among some industry watchers of a massive price spike that could hurt businesses and consumers.
The oil industry needs to replace 33 billion barrels of crude every year to satisfy anticipated demand growth, particularly as developing countries like China and India are consuming more oil. This year, new investments are set to account for an increase of just 20 billion barrels, according to data from Rystad Energy.
The industry's average decline rate -- the speed at which output falls without field maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year, the Norway-based consultancy said. In the four years before the crash, that decline rate was 3.9%.
Any shortfall in supply could push prices higher, similar to when oil hit nearly $150 a barrel in 2008, some industry participants say.
"The years of underinvestment are setting the scene for a supply crunch," said Virendra Chauhan, an oil industry analyst at consultancy Energy Aspects. He believes a production deficit could come as soon as the end of next year, potentially pushing oil above $100 a barrel.
In parts of Brazil and Norway, decline rates are already above 10-15%, Energy Aspects' Mr. Chauhan said. Output from Venezuela's aging fields fell by more than 700,000 barrels a day over the past year, according to the IEA. In June, Angola's output hit a 12-year low, while Mexico's production is down nearly 300,000 barrels a day since the middle of 2016, despite efforts to open up the industry and reverse declines, the IEA said.
"Nobody is really stepping in," said Doug King, chief investment officer of the $140 million Merchant Commodity hedge fund. "People still got burned by the downturn."
Jul 29, 2018 | peakoilbarrel.com
George Kaplan says: 07/27/2018 at 3:42 pmRystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that will make things look better. I thought things were worse, partly because I assumed the Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it looks like they are new fields. Overall though it still shows a big drop over the past few years.Watcher says: 07/28/2018 at 2:37 am
Oilprice.com is presenting the same data with a lot more hype and celebration.George Kaplan says: 07/28/2018 at 4:03 amA "remarkable" recovery from "abnormally" low levels – complete bollocks, and pretty close to self-contadictory. Everything is, and always will be, awesome in the oilprice universe, if not they'd lose their revenue stream.Michael B says: 07/28/2018 at 7:00 amGeorge, I admit I had to rub my eyes when I read that op.com version.Guym says: 07/28/2018 at 8:28 am
Loathsome Nonsense.Yeah, because they are mostly deep sea stuff, we should expect to see that pumping by next month?
Jul 28, 2018 | www.zerohedge.com
After the liquidation of its US Treasury holdings, surging gold reserves, and switching to a non-SWIFT payment system , Russian President Putin attempted to quell general concerns noting that "Russia isn't abandoning the dollar."
In a press conference this morning, the Russian president said his country doesn't plan to abandon holding reserves in U.S. dollars though he said that the risk of sanctions is prompting Russia to diversify its foreign currency assets.
"Russia isn't abandoning the dollar," Putin said in answer to a question about the sharp decline in its holdings of U.S. Treasuries in April and May.
"We need to minimize risks, we see what's happening with sanctions."
"As for our American partners and the restrictions they impose involving the dollar," he added,
"I think that is a major strategic mistake because they're undermining confidence in the dollar as a reserve currency."
Putin did however caution that the US is making a big mistake if it hopes to use the dollar as a political weapon:
" Regarding our American partners placing limitations, including those on dollar transactions, I believe is a big strategic mistake . By doing so, they are undermining the trust in the dollar as a reserve currency"
In this vein, Putin added that many countries are discussing the creation of new reserve currencies, noting that China's yuan is a potential reserve currency, but concluded:
"We will continue to use the US dollar unless the United States prevents us from doing so."
The Russian president also emphasized the need for other currencies in global trade and the emergence of new reserve currencies like the ruble.
Just last night we laid out the four major moves that Russia seems to be taking to de-dollarize so we suspect this comment by Putin is lipstick on that pig so that the rest of the world doesn't front-run him.
Additionally, President Putin said he's ready to hold a new summit with U.S. counterpart Donald Trump in either Moscow or Washington, praising him for sticking to his election promises to improve ties with Russia.
"One of President Trump's big pluses is that he strives to fulfill the promises he made to voters, to the American people," Putin told a press conference at the BRICS summit in Johannesburg.
"As a rule, after the elections some leaders tend to forget what they promised the people but not Trump."
Putin, who said he expects to meet Trump on the sidelines of the G-20
strannick -> BaBaBouy Fri, 07/27/2018 - 10:11 Permalinkbeemasters -> strannick Fri, 07/27/2018 - 10:19 Permalink
Putin: "Russia isnt abandoning the dollar"
Russia's just selling all its US Treauries and then using the cash to buy gold.
"The first to sell is a rat. The last to sell is a fool"Brazen Heist II -> beemasters Fri, 07/27/2018 - 10:23 Permalink
"Regarding our American partners placing limitations, including those on dollar transactions, I believe is a big strategic mistake. "
It's been going on for a long time (with other weaker nations) and he is just voicing it now?Klassenfeind -> Brazen Heist II Fri, 07/27/2018 - 10:53 Permalink
The Anglo Zionist empire not only weaponizes the USD, but also "democracy" and "human rights".
The golden days of the 1990s where Uncle Scam could enjoy unrivalled power are gone. Like all greedy full spectrum empires, abusing unipolar power with wild abandon and arrogance is now starting to hurt.
Sandbox the Zionist infil traitors and take down the tentacles of the Deep State, and let America join the global polity of great nations in a new paradigm of peaceful coexistence, rather than following the directives of that small, paranoid tribe bent on full spectrum dominance.
One thing that makes me optimistic is that more people are becoming aware and are questioning the apparatus and narratives of the old world order. It was alot different 10 years ago, when I felt like I was a very small minority with a multipolar view, drowned out in a sea of denial.Brazen Heist II -> Klassenfeind Fri, 07/27/2018 - 10:58 Permalink
As always, Putin is spot on!
Trump and his ZH crybabies whine on about how "unfairly the rest of the world has been treating the US" but they 'conveniently' forget that most of today's problems (wars, financial instability, fiat currency) originate from the US Reserve Currency Status and the Breton Woods system which the US has been using UNFAIRLY to it's advantage for Many DECADES in order to finance wars and manipulate the price of commodities.
But that's too difficult to grasp for most Trumptards... They're too busy screaming "sieg heil" for the Orange Jew!Bokkenrijder -> Brazen Heist II Fri, 07/27/2018 - 11:00 Permalink
Charles de Gaulle called that the exorbitant privilegeBrazen Heist II -> Bokkenrijder Fri, 07/27/2018 - 11:11 Permalink
These ZH Trump fanboys are the biggest idiots.
Really, you couldn't make this shit up;
*) They complain about foreign wars and the MIC, yet vote for someone who promised to INCREASE the Pentagon's already enormous budget
*) The complain about "the Jews," "Israhell," and "the ZOG," and yet they vote for someone who is in bed with Israel and Netanyahu and has a Jewish-American lawyer who fucks him over
*) They complain about the "banksters," and yet they vote for someone who makes a Deep State Goldmanite (Mnuchin) his Treasure Secretary
*) They complain about The Deep State and The Swamp, and they vote for someone who hires Pompeo, Haspel and Bolton
*) They complain about the massive amounts of debt and the fiat currency system, and yet they vote for someone who calls himself "The King of Debt" and calls for a massive increase in military spending
I guess now the ZH Trumptards only have one 'weapon' left: downvotes!Klassenfeind -> Brazen Heist II Fri, 07/27/2018 - 11:13 Permalink
I'm not your classic fanboy of Trump, but he has to work with those cretins somehow, and not turn into a degenerate pedophile in the process. He was the lesser of two evils presented in the 2 party duopoly, sadly, that's what modern 'democracy' has become; a Hobson's choice.
So far, he's doing alright, given the circumstances, and everything stacked against him.Brazen Heist II -> Klassenfeind Fri, 07/27/2018 - 11:26 Permalink
"He was the lesser of two evils presented in the 2 party duopoly,..."
I completely agree with that assessment, but what I fail to understand is how the supposedly "highly educated readers of ZH," can be so fucking stupid to blindly believe all the Trump bullshit.
Being the lesser of two evils is still not being very good I'm afraid, and being the lesser of two evils means that he still kinda sucks.
That is what we're witnessing every day: a stupid narcissistic idiot who can barely play 0,5D chess, let alone 4D chess...Money_for_Nothing -> Klassenfeind Fri, 07/27/2018 - 11:47 Permalink
The system that churns out leadership in America is fundamentally flawed and corrupted to the bone, yet once in a blue moon, an "insider outsider" as I like to call them, like Jackson, Kennedy and Trump, slips through. And that's when decades happen in a few years.Giant Meteor -> Klassenfeind Fri, 07/27/2018 - 12:05 Permalink
Who blindly believes bs? Trump is provably the most honest politician since the invention of recording devices. Just having an uncontested birth certification and school records is a big head start. Who do you think would make your paycheck (subsidy?) go higher than President Trump. Trump is threatening a lot of people's sinecures and subsidies. Who wants to guarantee more NPR wannabee hacks a good paycheck?HardAssets -> Klassenfeind Fri, 07/27/2018 - 13:12 Permalink
What a lot of folks seeem to overlook is that the lesser of two evils is still, wait for it, ... evil. This is a highly subjective measurement of course, the beauty of all that evil being in the minds eye, of the beholder ..Scipio Africanuz -> Klassenfeind Fri, 07/27/2018 - 13:49 Permalink
'Stupid' ?, no I highly doubt that.
What do we have ? IMO the jury is still out on that one. I had hoped that President Trump would talk straight to the American people. Particularly in regards to the true state of the overall economy. But those of us who have tried to inform friends & family on these subjects have run up against that solid wall of denial. Most people don't want to hear the truth. They fight against it with everything they've got. Between the Deep State attacking Trump to maintain their privileges & power, and a dumbed down population aggressively in denial - the president has a Herculean challenge.Consuelo -> Brazen Heist II Fri, 07/27/2018 - 11:27 Permalink
Fine, we are Trump fan boyz and Putin fan boyz, and we'll believe whatever we choose to believe, for our own reasons, and we don't owe anyone a stinkin explanation why!
You can open your eyes, and see why we support, fight for, defend, and will keep fighting for Trump! He's the Hope that we can Change the vampirous system that's defenestrated everyone playing by the rules!
He's a narcissistic idiot who can barely play multidimensional chess? You don't say! Anyhow, even if he were, and he isn't, he's OUR narcissistic idiot who beat the living daylights, out of the prissy, elitist, wicked, and thieving a**holes arrayed against him!
So how come your folks couldn't win against a narcissistic idiot? Because your folks are the narcissistic idiots, who can't come to terms with the reality that Hope of True Change is here, and embodied in Trumpus Maximus Magnus!!
You don't like that he's a Maximux Magnus? Fine, you can suck my pinkie!...Brazen Heist II -> Consuelo Fri, 07/27/2018 - 11:32 Permalink
There is a clear battle going on and at 70+ years of age, I give President Trump a huge helping of credit just to deal with it all, without going insane in the process. One thing though... He had better corral the dirty-dealers around him, along with the hag and those involved from the previous administration, or it will eventually overwhelm him. Guaranteed.HardAssets -> Brazen Heist II Fri, 07/27/2018 - 13:24 Permalink
Indeed, its a battle for the soul of America. The pedophiles, degenerates, Zionists, imperialists must not win. A purge is needed and coming. I hope he survives like Jackson, and doesn't go the way of Kennedy. In any case, he has a big following, but I fear a civil war type scenario is coming no matter what happens. The vitriol and partizanship is at toxic levels.Vendetta -> Bokkenrijder Fri, 07/27/2018 - 12:32 Permalink
It's obvious that the NWO crowd weaponizes populations. Obummer wanted his internal force 'as well funded & equipped as the military '. And, theyve been working hard with their propaganda machine to overturn the American people's 2nd Amendment.
This is likely one of the most delicate & dangerous times in American history.
So let's see ... Hillary in conjunction with obama demonized Iran and Russia (Crimea... have you forgotten?) for years prior to trump ... overthrew Libya and stirred the pot in Syria via proxies ... and Bernie Sanders was against these wars AND against unfettered globalization ... all part and parcel of the neoconservative PNAC doctrine .... but trump trying to implement peace and diplomacy with Russia and North Korea is 'bad' ... but since at the same time he increases the budget for the MIC and he is 'bad' for doing so and he is pissing off our so-called 'trade partners' as manufacturing has essentially left the US ... so he is to pick a fight with the MIC internally to the nation on top of everything else including pissing of the globalist cretins in our so called intelligence (where are those WMDs) ... okie dokie ...
Jul 28, 2018 | blogspot.com.es
x Ignored says: 07/27/2018 at 3:53 am Iran would not try to block anything unless it is under attack by the US. The Pentagon is opposed to such an attack, but Trump is heavily influenced by Netanyahu and is advised by the same neocons who got the US into the fiasco in Iraq. Given the inability of the US Congress to enforce the constitution by denying the Prsident to start a war without a congressional declaration of war, it seems the USA may be on its way to destroy the world economy to please an extremist Israeli right wing government.
I write destroy the world economy because it's doubtful Iran would respond as anticipated by the Americans, who have a tendency to fight wars with strategies based on previous wars and an excess of complex gadgets and extremely expensive technology. I don't know what they have in mind, but I'm sure it would be unexpected, calibrated to avoid nuclear retaliation, and may evolve over time. But I'm sure others will see the risks, and the oil market will take off into the $100's and possibly $200's unless there's adults left in the USA senate to block this craziness.
- Mushalik x Ignored says: 07/26/2018 at 8:11 am Here is something:
Trump, Iran and the New Guns of August
- Hightrekker x Ignored says: 07/26/2018 at 9:51 am I agree– and with all those KSA installations just 15 minutes away by unstoppable missile technology (1970 midrange seems a little hard for current technology), we have a quandary, not a problem. Reply
- Eulenspiegel x Ignored says: 07/26/2018 at 10:24 am The worst thing for a date to guess is politics.
There are 10 countries that have to grow oil production to avoid peak oil – these with still big reserves.
One knocked out itself – Venezuela
One is under attack from the USA – Iran
Irak isn't that stable, either.
A hot war can break out every moment, or a civil war devasting and blocking infrastructure for years, while other countries deplete.
Or peace can come and these ressources can get used.
These combined 10 mb/d alone will determine peak oil – by 5 years or more in either direction. These 10 mb/day can't be replaced by russion oil tsars, US rednecks with too much Wallstreet money or Saudis opening secret valves of instant oil wonder production.
Venezuela can get a new government and increase production by a big amount, helped by international money. It has the ressources to get one of the big producers when the tar oil is lifted.
So in my eyes, it looks like somewhere between 2020 and 2030, perhaps even later.
- Iron Osiris x Ignored says: 07/26/2018 at 10:47 am Hi Michael B,
Couldn't agree with you more regarding OPEC reserve estimates, they are all full of shit, and no one except a handful of people in those countries would know how much they have left.
Solving this peak oil timing is more similar to a quantum mechanics problem rather than a Newtonian mechanics one. It complexity, lack of transparency and political and economic implication make it impossible to have a deterministic answer, its pure probability, and also speculations.
Like you i think all these projections are wrong. Maybe we will extract a lot more oil with newer technologies or new field discoveries and end up cooking the planet with climate change, and we won't see a "peak oil" for 100s of years who knows.
- TechGuy x Ignored says: 07/26/2018 at 2:54 pm "The peak oil experts were dreadfully wrong with their HL 15 years ago, so what prevents their being just as wrong now? "
Why is Oil at $70/bbl? Back in 1999 its was about $10/bbl. If there no supply constraints why did the price increase ~7 fold in less than 20 years? Also why the need to to drill for Shale Oil (Source Rocks) & develop in Deep & ultradeep water?
Conventional oil peaked in 2005, All the growth is coming from offshore & Shale. New Oil discoveries have dropped off the cliff. We found almost nothing in 2017. Oil Discoveries peaked in 1960s and been in permanent decline. Thus if we are discovery less and less new oil fields every year, below the rate of consumption, Oil production will have to fall to match discoveries at some point in the future.
1. Oil Majors perfer to drill on Wall street (aka using debt to fund stock buybacks) instead of developing new fields for future production.
2. Shale Debt: Shale drilling never made a profit, except for using OPM (other People's money) to fund CapEx\OpEx.
3. US invaded or targeted with Regime change in Middle East Oil producing nations. Only Iran remains and you can already hear the War drumbeats for Iran. Reply
- Fernando Leanme x Ignored says: 07/27/2018 at 4:25 am Michael, I have never been a peak oiler. I come at this from a different perspective: about 30 years ago I noticed exploration results were decaying, and started working in areas which would allow producing oil and gas in the far future from sources we weren't tapping much at the time.
I remember sitting in a meeting around 1990 and suggesting to managers in a committee I was briefing that we needed to focus on locking up hydrocarbon molecules, wherever they were, cut down exploration and use that money on technology and getting access.
This is one reason why eventually I got involved in gas conversion to liquids, heavy oil, and the former Soviet Union, which to us appeared like a happy hunting ground, including its Arctic targets in the Barents, Kara, Yamal, etc. I also had colleagues who went into deep water, EOR, North America Arctic, and of course the hydraulic fracturing of vertical horizontal wells drilled in low perm formations.
So in my case I've been about 30 years now working on replacing conventional oil barrels with more difficult barrels. And those difficult barrels require higher prices. So the question is, what can poor countries afford? Reply
- Michael B x Ignored says: 07/27/2018 at 5:13 am So, "not a peak oiler" means you think the fate of conventional oil is not really all that important, and cost is the ultimate arbiter, not the resource? Reply
- Fernando Leanme x Ignored says: 07/27/2018 at 6:19 am Not a peak oiler means I don't use Hubbert Linearization or similar techniques. In the past, my job has included the estimate of resources (not reserves). The preferred technique was to estimate technical reserves, meaning we supposedly didn't focus on economics. But I couldn't have staff working out numbers doing endless iterations and model runs for highly speculative cases, so I gave them the guidance to assume a really high price, a higher OPEX and CAPEX environment, and prepare conceptual field redevelopments and marginal field developments or targeting really low quality reservoirs. We devoted about 5% of the time budget for this effort. And I told head office I wasn't about to use more manpower working such hypothetical figures, because we had to focus on reserve studies, and preparing projects to move reserves along the reserve progression pathway so we could meet our targets.
The fate of conventional oil is already written, in the sense that most of the extra oil we get from conventional fields comes from redevelopments which rely on higher prices, and EOR. The typical field with say 45% recovery factor can be pounded hard to push it to say 55%, going above 55% gets mighty hard, and pushing to 60% is nearly impossible. So there are limits, which involve the huge amount of resources (cash, steel, chemicals, and people) we use up to get those extra barrels.
One issue to consider is that these redevelopments which include EOR are not contributing that much extra rate. They stop decline, get a slight bump, and then yield a slower decline rate for 10-20 years. This means investments take tine to payout and if the world is suffering from acute shortages they don't help that much. The on,y fast reaction comes from fracturing "shales" and low permeability sands, infills in newer fields, and workovers. Reply
- Michael B x Ignored says: 07/27/2018 at 6:53 am Thanks. If you were doing this in the 90s, sounds like you were "predicting" the future! Reply
- Hickory x Ignored says: 07/27/2018 at 9:20 am Sure sounds like a long explanation for your understanding of 'peak conventional oil'. Nothing to be ashamed of. Reply
- AdamB x Ignored says: 07/26/2018 at 10:08 am With oil discoveries the last 3 years in the toilet due to lack of capital investment and lack of major fields its just a matter of time mathematically. Be thankful we still have time before peak production hits cause I don't think it will be fun post peak. Hopefully still 5 years until its official maybe less When will Ghawar give up the ghost .? Reply
- Dennis Coyne x Ignored says: 07/26/2018 at 11:21 am Saudi Arabia may keep going for many years at 10 Mb/d, probably until 2030, perhaps beyond. Reply
- AdamB x Ignored says: 07/26/2018 at 12:02 pm One can hope .they can produce 10 Mb/d to infinity according to their reserve numbers which never budge .I'd be curious what posters think their reserves are. 175-225 GB? Reply
- Survivalist x Ignored says: 07/26/2018 at 2:27 pm It'll be interesting to see how KSA shakes out when oil consumption begins to zero in on oil production, and exports decrease.. ELM.
- Hightrekker x Ignored says: 07/26/2018 at 3:11 pm Well, we did discover that 'elephant" in Azerbaijan in 2000–
It has only been 18 years. Reply
- Dennis Coyne x Ignored says: 07/26/2018 at 10:58 am Another consideration is discoveries and reserve appreciation. Consider estimates of conventional C+C using Hubbert Linearization by Jean Laherrere which have gradually increased from 1998 (1800 Gb) to 2016 (2500 Gb.) In addition, there is not any particular reason that output would tend to follow a "Hubbert" type logistical function.
Generally estimates based on Hubbert Linearization would be a minimum estimate in my view.
In addition conventional oil Extraction rates (output divided by producing reserves) in the World (5.6% in 2016) are far lower than the United States (14.8% in 2016, all C+C), so there is the potential that with higher oil prices the average extraction rate for the World may increase. The World conventional extraction rate was about 11.6% in 1979. A gradually increasing rate of extraction might allow a plateau in output to be extended for many years (to 2030 at least). Impossible to predict of course, the number of scenarios that can be created is large.
One such scenario is presented below (peak in 2025 at 85.5 Mb/d of C+C or 4275 Mt/year).
The analysis using the logistic function does not account for this potential.
- Energy News x Ignored says: 07/26/2018 at 11:44 am International Energy Agency – Oil Market Report: 12 July 2018
now available to non-subscribers
download from here: https://www.iea.org/oilmarketreport/omrpublic/currentreport/
- TechGuy x Ignored says: 07/26/2018 at 2:26 pm https://srsroccoreport.com/top-u-s-shale-oil-fields-decline-rate-reaches-new-record-half-million-barrels-per-day/
"While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever." Reply
- Michael B x Ignored says: 07/26/2018 at 3:51 pm Good article. Reply
- Dennis Coyne x Ignored says: 07/26/2018 at 6:49 pm I disagree. Oil prices are more likely to increase than to fall to $30/b and more of these companies are likely to be profitable as oil prices rise, also 3 of the top companies are profitable, so a "well run" oil company can indeed be profitable, those that are less well run will either change the way they operate or they will go out of business. The better companies buy the worthwhile assets on the cheap and life goes on.
It's called capitalism folks.
Also the DPR is not very good, I ignore that report and use EIA's tight oil estimates (link below) and shaleprofile.com for good information.
- Minqi Li x Ignored says: 07/26/2018 at 3:55 pm I suppose by "decline rate" they are talking about the "legacy decline" Reply
- Guym x Ignored says: 07/26/2018 at 5:48 pm As an example, I will use approximate data from a fairly good tier 2 well in the Eagle Ford. It starts off production at 33k the first month, and drops rapidly after that to reach 8k by the final month. Let's say it produces 175k the first year, which would be profitable at today's prices. The next year it produces 55k, and the next year 36k. By the fourth year it is producing less than 100 barrels a day, and by the sixth year it is questionable to keep up. Little better than stripper status. Tier three stuff is much worse, it may reach stripper status by the third year. Eventually, all will be tier two and three status wells. That's the majority of reserves estimated. Estimating future production from current production doesn't touch on reality. Eventually, to keep up on initial production, you would have to drill twice as many wells. But, you won't keep up with twice as many, because the decline rates will be higher. There is a lot of difference between a 600k EUR well, and a 300k EUR, or a 150k EUR. 2042 for US peak? Not hardly. Reply
- Dennis Coyne x Ignored says: 07/26/2018 at 6:44 pm Guym,
I agree, probably 2023 to 2025 will be the US peak, after that decline is likely to be rapid because mostly tier 2 and tier 3 wells will be left, high oil prices may make them profitable, but it will be impossible to keep up with the decline rate of legacy wells after 2025 and US output will decline rapidly (4 or 5% per year) after 2030. Reply
- Guym x Ignored says: 07/26/2018 at 7:00 pm Exactly. Reply
- TechGuy x Ignored says: 07/26/2018 at 7:48 pm One snag: The Shale Debt starts coming due in 2019 and continues through to 2024. Shale drillers were successful since the borrowed at rock bottom interest rates and investors practically fought each other begging Shale drillers to take their money. Not so sure it will work if interest rates are higher, and The Shale sweet spots aren't endless. Reply
- Guym x Ignored says: 07/26/2018 at 8:49 pm That might slow the start up, for sure. If the price of oil gets high enough, that will barrier will be short lived. Reply
- TechGuy x Ignored says: 07/27/2018 at 2:43 pm As oil prices increase so does the costs. It takes a lot of diesel to haul Water, Sand, and oil. Shale drillers never really made a real profit, even when Oil was over $100/bbl. One must consider the EROEI for Shale & rising CapEx\OpEx as the cost of Oil rises.
Second, its likely that consumers cannot afford high oil prices. As prices rise, Consumers will cut back and it will plunge the global economy back into recession. Perhaps the Worlds Central banks can coach something back into the global economy, but it won't work over the long term.
FWIW: Some of the recent data is showing weakness in the global economy: Housing sales are falling and prices in the hot regions are flatlining. Trumps tariffs are also taking a toll as global trade is falling. And there are cracks in the developing world credit markets. We might see a stock market correction this fall, which would likely see commodity prices fall (including Oil). Reply
- Hickory x Ignored says: 07/27/2018 at 10:37 pm " consumers cannot afford high oil prices. As prices rise, Consumers will cut back and it will plunge the global economy back into recession."
Well, that likely depends on how fast and far the prices go. Slow steady rise can be well tolerated pretty far. Energy is so cheap for what you get, after all.
Many other countries have a much better GDP/unit energy consumed than the USA, and with price pressure the USA could get there too. I suspect we could shed 10-20% of our oil consumption without big effect, particularly if we did it slowly. For example, it wouldn't affect the GDP at all if we slowed down to max 60 mph. Painless saving of energy, if you choose good music.
It is the fast changes in price that really tend to hurt. Reply
- TechGuy x Ignored says: 07/27/2018 at 11:45 pm "I suspect we could shed 10-20% of our oil consumption without big effect, particularly if we did it slowly."
It doesn't work that way. Consumers cut back on spending, from eating out, going on vacations. They loss confidence and delay major purchases like new cars, homes, etc.
Most of the population commute to work well below 60 mph. Traffic usually limits speeds to 40 mph or less during commuting hours.
To understand how high oil prices affect the economy just research the events around 2007/2008. Schools & business were planning to reduce work & school days to 3 or 4 days a week. Thieves were draining fuel from parked trucks and cars. The higher oil prices caused food prices to soar, which lead to the arab spring in Africa & the middle east. Europe had frequent riots. Airlines & shipping companies impose fuel surcharges. People homes had utilities shutoff. since they could afford their energy bills.
Funny how quickly people forget the aftermath of high energy prices. Doesn't anyone read or study economics?
- GoneFishing x Ignored says: 07/26/2018 at 5:28 pm Nice report. Production decline is a short time away if we don't keep drilling.
Speaking of legacy wells, the huge number of abandoned wells from the past is leaving us a legacy of leakage. The even bigger number of recent wells will continue that legacy.
- Fernando Leanme x Ignored says: 07/27/2018 at 4:33 am 150 year old wells in the eastern USA could indeed leak methane. But I would not rely much on Arstechnica, it's a blog run by a guy with a liberal arts degree very well crafted to be a cheering section for renewables. It may even be subsidized by Yingli Green, a Chinese solar panel maker. Reply
- Fred Magyar x Ignored says: 07/27/2018 at 6:57 am Are you seriously claiming that a peer reviewed scientific paper, in the 'Proceedings of The National Academy of Sciences of The United States of America' is somehow untrustworthy because it's conclusions were mentioned by Ars Technica?!
They also provide a link to the paper:
Identification and characterization of high methane-emitting abandoned oil and gas wells
Recent measurements of methane emissions from abandoned oil/gas wells show that these wells can be a substantial source of methane to the atmosphere, particularly from a small proportion of high-emitting wells. However, identifying high emitters remains a challenge. We couple 163 well measurements of methane flow rates; ethane, propane, and n-butane concentrations; isotopes of methane; and noble gas concentrations from 88 wells in Pennsylvania with synthesized data from historical documents, field investigations, and state databases. Using our databases, we (i) improve estimates of the number of abandoned wells in Pennsylvania; (ii) characterize key attributes that accompany high emitters, including depth, type, plugging status, and coal area designation; and (iii) estimate attribute-specific and overall methane emissions from abandoned wells. High emitters are best predicted as unplugged gas wells and plugged/vented gas wells in coal areas and appear to be unrelated to the presence of underground natural gas storage areas or unconventional oil/gas production. Repeat measurements over 2 years show that flow rates of high emitters are sustained through time. Our attribute-based methane emission data and our comprehensive estimate of 470,000–750,000 abandoned wells in Pennsylvania result in estimated state-wide emissions of 0.04–0.07 Mt (1012 g) CH4 per year. This estimate represents 5–8% of annual anthropogenic methane emissions in Pennsylvania. Our methodology combining new field measurements with data mining of previously unavailable well attributes and numbers of wells can be used to improve methane emission estimates and prioritize cost-effective mitigation strategies for Pennsylvania and beyond. Reply
- Fernando Leanme x Ignored says: 07/27/2018 at 8:33 am I am an academy member. I also know how to search for methane leaks. And I'm aware the academy publishes papers which lack the quality one would like to see. But if you want credibility, I would skip Arstechnica and link directly to the paper.
The Arstechnica editor has an axe to grind, publishes a bunch of garbage, therefore I never pay attention to it. Regarding the paper itself, it's not representative of what goes on in say Texas. There are areas in Texas (say Spindletop) where gas leaks should be present from the wells drilled with cable tools in the old days. But a better sense for what goes on now is gained from looking at wells drilled and abandoned in Texas and Louisiana in the last 40 years.
Regarding Pennsylvania methane leaks, in the overall picture they are meaningless. There are coal mining regions in India and China which can be seen as very large hot spots from satellites.
A better link can be found here: https://earthobservatory.nasa.gov/images/91564/what-is-behind-rising-levels-of-methane-in-the-atmosphere
And then you have to ask yourself what happened in 2006 to change the way methane was rising? Was it the climate? Or was it South Dakota? Reply
- Fred Magyar x Ignored says: 07/27/2018 at 9:39 am I did link directly to the paper!
As did ArsTechnica. Reply
- GoneFishing x Ignored says: 07/27/2018 at 9:49 am Turn around fast, danger rabbit hole ahead! Reply
- GoneFishing x Ignored says: 07/27/2018 at 9:07 am https://www.edf.org/media/new-oil-and-gas-study-shows-once-again-industry-severely-underreporting-methane-emissions
If the wells are plugged, the concrete eventually fails (30 years) so we have an ongoing source of methane that could last for centuries. Millions of wells across the US, much more across the world.
And guess what, those ideas of storing CO2 underground, well now we have millions of pathways for the CO2 to escape, so actual sites would be few and far between.
Ethan Davis, an energy analyst and consultant with the Union of Concerned Scientists who looked over the new analysis, concurred, noting that even if the 3.2 percent leakage rate was accurate, it is above what some studies have shown would be necessary to realize any climate benefit from the coal-to-natural-gas switch.
The original Canadian study I read a few years ago has disappeared from the internet. It showed the long term potential leakage of well systems. Reply
- Dave Kimble x Ignored says: 07/26/2018 at 6:11 pm All this Hubbertian analysis is useful to set a ceiling on production, but the world's economy runs on making a profit and so producers have a minimum price they must receive, while the end consumers have a maximum price they can afford to pay.
In mid-2008 the effect of a 72% price rise in 18 months caused a $1.75 trillion extra cost on OECD oil imports and the world economy crashed. Recovery required the USG to guarantee loans to frackers to get the production numbers up. I am not saying that they won't try that again, but this can only go so far. Surely next time this happens, no one will be able to avoid the obvious conclusion that there is no future profit in oil production, and the oil industry will have its share prices downgraded, reducing the collateral for loans, whereupon they will go out of business in a puff of smoke.
This will happen long before any URR impacts, so I wonder at how much this analysis is worth. Reply
- Guym x Ignored says: 07/26/2018 at 8:25 pm USG guaranteed loans to frackers???? Interest rates for everyone was low then, but I don't remember reading about any guarantees. Drilling horizontals is a little past SBA stuff. Reply
- George Kaplan x Ignored says: 07/27/2018 at 1:56 am If the "oil industry" means the IOCs then they are a minor player now. The NOCs dominate the reserves and production, of course they all seem to be having money issues as well but maybe they manifest in a slightly different way – i.e riots, uprisings and infrastructure collapse.
It's already noticeable that many of the big companies are switching to share buy backs (Total, Shell, Anadarko) and less development spending even as the price has been rising. The one which has switched the other way is ExxonMobil, and not uncoincidentally it is the only one with really good recent discoveries. That straight line H/L for the rest of the world is just the tail run out on existing discoveries, most of which are also already developed and wouldn't be taken off line even with bankruptcies for the operators. If only as chemical feedstock oil is way better in almost every way than anything that could be made from water/CO2/renewable energy so if civilisation lasts long enough most of it will be used. Reply
- George Kaplan x Ignored says: 07/27/2018 at 1:44 am Forcing a logistic curve on some of those production histories might give some big errors, though maybe they cancel out overall. Hubbert said himself that H/L wouldn't work well on production that had been artificially constrained by a cartel (e.g. OPEC for Saudi, Kuwait, UAE, Iran and Iraq) or environmental moratoria (e.g. some US and Canada oil). For oil sands they tend to be built on 50 year project lives, with steady production and a fast fall off rather than a traditional decline curve. About 50 mmbbls of reserve is already tied into operating, steady production. Future developments will be similarly constrained with the additional limit from environmental objectives to both the extraction and pipelines. Logistics curves might still come close if the reserve estimates are good, but that is also the biggest unknown as other comments have said. Reply
- Minqi Li x Ignored says: 07/27/2018 at 2:54 pm Projections are not meant to be predictions. Even EIA or IEA say that. But they are always useful to illustrate given certain assumptions, what will or what are likely to happen.
That has been said, given our understanding of the inherent limitations of projections/data, a careful and cautious application of these projections does provide us some idea regarding the likely range of future development. For example, the projection for the US oil used in this report is likely to be too optimistic especially for years after 2025, as many have pointed out. That will reinforce the case for a global peak oil before 2025
In addition to production, I think the consumption data in the report also provides some interesting information. I wonder if someone cares to comment about that. Reply
- Eulenspiegel x Ignored says: 07/27/2018 at 7:25 am An info about the cost of permian wells:
"Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous quarter"
So it's round about 13 million $ per well, not 7 million. Reply
- Fernando Leanme x Ignored says: 07/27/2018 at 8:38 am The number of wells brought on isn't proportional to wells drilled. And the CAPEX isn't proportional to wells drilled. Therefore it's hard to derive a per well cost from such figures. Reply
- GuyM x Ignored says: 07/27/2018 at 9:06 am Yeah, there a lot of DUCs, and you have to consider that Pioneer lays out some bucks for its gathering system and gas processing plant in the Permian. Hard to isolate per well from total capex figures. Reply
- Eulenspiegel x Ignored says: 07/27/2018 at 9:25 am At least it tells, why the calculation
(Sale of oil) – well cost – variable cost per barrel = profit
does not work that good – there are lots of hidden costs even under CAPEX, that are almost as high as completion costs when these 7 million$ / well are right.
And I think these cost are not one time cost just only in this quarter – there is alway a pipeline to build, a convertert to install, a gravel road to the site to build and so on. Reply
- George Kaplan x Ignored says: 07/27/2018 at 3:42 pm Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that will make things look better. I thought things were worse, partly because I assumed the Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it looks like they are new fields. Overall though it still shows a big drop over the past few years.
- George Kaplan x Ignored says: 07/27/2018 at 3:47 pm Baker Hughes rig count up two for USA, twelve for Canada. GoM down one oil and one gas.
Jul 28, 2018 | www.zerohedge.com
two hoots -> Free This Fri, 07/27/2018 - 14:09 Permalinkmoobra -> two hoots Fri, 07/27/2018 - 21:53 Permalink
The oil is good to have but:
With over 3000 platforms, 25,000 miles of pipeline, all unsecure in the Gulf of Mexico, they provide a lucrative target in any conflict with the US. Energy disruptions and environmental calamities would reek havoc. Surely there is a plan to quickly secure the Gulf from under/over/on the water threats? If not get at it.
https://www.fractracker.org/2014/11/latest-incident-gulf-of-mexico/httpshortonoil -> Newbie lurker Fri, 07/27/2018 - 16:28 Permalink
If you threaten the energy security of the US you will be liberated if you are a country or droned if you are an individual.Victor999 -> Newbie lurker Fri, 07/27/2018 - 17:10 Permalink
More Oilprice.com industry pimping. The world uses 36 billion barrels (Gb) of crude per year. Plus they are quoting boe, or barrels equivalent. Gas is not crude. The article should read: "The world is still pumping 9 barrels for every 1 it finds". D day is not something the industry doesn't wants advertised.Toxicosis -> Free This Fri, 07/27/2018 - 15:13 Permalink
We use well over 30B BOE a year, globally. We found new reserves of 4.5B BOE in 2018 so far. Do the math.Liquid Courage -> Ghost of PartysOver Fri, 07/27/2018 - 15:18 Permalink
If that's the case, then why are virtually all shale companies in massive debt?
I don't care if you educate yourself. But stupidity should hurt.CorporateCongress -> LawsofPhysics Fri, 07/27/2018 - 15:19 Permalink
Look at the graph again. Draw a trend line from left to right across the peaks from 2014 til now. Is the line pointing up or down? That's peak oil.
So there's been an up tick this year. How much has been discovered. Ooooh, 4.5 billion barrels. Sounds like a lot to you? What's the world consumption rate expressed in millions of barrels per DAY? Don't know? It's around 90 million barrels per DAY. Look it up if you doubt me. If you divide 4.5 billion by 90 million, you'll calculate how many DAYS it takes to consume 4.5 billion barrels. To make it easier for you, just reduce the fraction by stroking 6 zeros off each number. That's 4,500/90. Not too hard. That's 50 DAYS of supply!!! OK, maybe another 4.5 billion will be found in 2H2018. Oooooh, another 50 DAYS worth. We're saved!!!
In the last paragraph, what's the Reserve Replacement Rate? 10% . That's not so good.
Also, a large portion of the newly discovered oil is offshore, in ultra deep reservoirs. Do you think that might be more expensive to produce?
As for abiotic oil, as Laws of Physics pointed out, even if that desperate theory were true -- which it isn't -- it's the rate of replacement that matters, and it's nowhere near 90 million barrels per day.
So, fore-warned is fore-armed, but if you'd rather bury your head in the sand that's your prerogative.Serfs Up Fri, 07/27/2018 - 13:49 Permalink
Oil consumption alone is almost 100 mmbpd. Meaning that in 6 months they found a whopping 1.5 month of supply... we're nowhere near what we need
Average monthly discoveries in 2018 = 826 million barrels
Average monthly usage in 2018 = 2,850 million barrels.
This is fine.
Jul 23, 2018 | crookedtimber.org
WLGR 07.23.18 at 7:13 pm 14 (no link)I hope it's clear to any thoughtful reader that the scenario Robert Zannelli lays out above -- from high US political officials like Donald Trump as tightly controlled assets of the Russian state, to squishy soft-left social democratic commentators like Chris Hedges as secret committed Marxist-Leninists, to respected intellectuals like Cornel West as hapless dupes of this aforementioned Russian/Marxist conspiracy -- might as well come straight out of a badly photocopied John Birch Society pamphlet of the 1950s or 1960s.
If it wasn't so disturbing to witness mainstream American liberalism's recent descent into a prolonged fit of vintage Cold War jingoistic paranoia, it'd be pretty satisfying to see such clear corroborating evidence right here in this thread of the deep ideological kinship to which I was just alluding, between mainstream anti-leftist liberalism and the far-right reactionary fringe. As is, I can only hope that enough people searching for ways to understand the rise of the far right in the US and elsewhere are able to weigh the frenzied ideological fever dreams of Russiagate-obsessed US liberals (citing the influence of shadowy foreign conspiracies against an otherwise pristine liberal political order) against the sober analysis of leftists like Losurdo (citing the influence of the liberal political order's own immanent tensions and contradictions) and have the presence of mind to opt for the latter.
@WLGR 07.23.18 at 7:13 pm
If it wasn't so disturbing to witness mainstream American [neo]liberalism's recent descent into a prolonged fit of vintage Cold War jingoistic paranoia, it'd be pretty satisfying to see such clear corroborating evidence right here in this thread of the deep ideological kinship to which I was just alluding, between mainstream anti-leftist liberalism and the far-right reactionary fringe.
Somebody joked that Obama married the neocons to the humanitarian bombers and to the SJWs. It s a powerful alliance...
Reaction to the crisis of neoliberalism and loss of confidence in ruling elite generate many different attempts to restore the status quo, some of them grotesque.
BTW Trump's "National neoliberalism" is one of them. See Sasha Breger Bush in https://www.commondreams.org/views/2016/12/24/trump-and-national-neoliberalism
In this sense, we can view Anti-Russian paranoia as a desperate attempt to the ruling neoliberal elite to restore the control of the narrative and cement the cracks in the neoliberal society on the basis of uniting the society via neo-McCarthyism hysteria. Because regular propaganda and neoliberal myths lost their persuading power and no longer work they resort to classic forms of war propaganda in the center of which is the demonization of the "enemy of the people."
Moreover, the carpet bombing of Trump in neoliberal MSM is really a sign of paranoid reaction of neoliberals (both hard and soft) on the possibility of losing grip on the US electorate and the beginning of the process of dismantling/downsizing the global neoliberal empire led by the USA.
Trump rejection of existing forms of neoliberal globalization is one sign that this process already started and some politicians already are trying to catch the wind.
"Enrightenment" probably should be understood as the dramatic rise of nationalism including some forms of far right nationalism as a reaction on the crisis on the neoliberal society.
Jun 22, 2018 | foreignpolicy.com
Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil exporters will likely only be able to add about half that total to global markets, because many countries are already producing at capacity or face severe threats of supply disruption.
Oil markets weren't calmed by the agreement announced Friday by the Organization of the Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than $74 a barrel.
OPEC didn't agree to increase production as such. Rather the group, with the addition of nonmember Russia, agreed to respect its existing program of restricting supplies. But since the group had gone well overboard and trimmed output by almost 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market -- on paper, at least.
In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of crude in the next few months. That means Friday's agreement will end up adding about 600,000 barrels of oil a day to the global market.
The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead of midterm elections later this year. Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.
Jul 18, 2018 | www.moonofalabama.org
karlof1 , Jul 17, 2018 6:32:31 PM | 138stonebird @126--
There's a longstanding joke in the USA regarding military intelligence in that it's always lacking in said intelligence. What happens is raw intel gets politicized and thus what was once neutral becomes dumb or false as one prefers.
What dooms the Outlaw US Empire and its vassals is its Zerosumism and related neoliberal/neocon policies that are driven by same philosophy. Zerosumism precludes any sort of equal dealing with others, even one's own citizenry--all is to go to the .01% as in Feudalism. To jump ship to the If you can't beat 'em join 'em path, a wholesale rejection of Zerosumism must occur and WinWinism must be embraced wholeheartedly in its place. Indeed, if Trump really wants to accomplish his MAGA project, he only has one choice: He must dump Zerosumism, which is destroying the USA and its allies, and embrace WinWinism. But to accomplish that, Trump would need far more support from US citizenry and institutions than he has at present. And unfortunately, his actions to date show he's still an acolyte of Zerosumism as it benefits him and his class.
As with the supposedly ideologically driven Cold War1 (the Anti-Communist Crusade was used as cover for neocolonialism), there is certainly an ideological divide driving Cold War2: The West's Zerosumism versus Eurasia's WinWinism. The former is anti-people and planet while the latter seeks to boost people while tackling a multiplicity of problems of which Climate Change and its Ocean Acidification is but one. Corruption thrives in the former while its anathema in the latter and subject to the death penalty in China--I'd also call that an ideological divide as the latter embraces the Rule of Law while the former ignores or tramples it (democracy versus totalitarianism).
What's really crazy is Zerosumism works against the tenets the West spelled out for itself and the world in 1945's UN Charter--the West is actually engaged in killing its own ideals! The Twitter link I posted @72 illustrates quite well the delusion of Zerosumism and the ideological divide that's quickly becoming a chasm. What the Twitteridioti don't realize is just how far their minds have been warped by Big Lie Media along with their lack of initiative to determine the facts--particularly in 2016 when this all began. Even if Assange or Murray were to name those who generated the DNC leak , I don't think that would stop the massive recrimination and ongoing Big Lies--as Murray tells us, the FBI has yet to ask him anything despite his very public admission that he knows the leakers!!!!! Launching Cold War2 is more important than discovering the truth of the matter can be the only logical conclusion.
Jul 16, 2018 | peakoilbarrel.com
Energy News, 07/11/2018 at 1:14 pmUS total (oil + products) inventories made a new low (from the high February 2017)Mushalik , 07/11/2018 at 3:45 pm
US ending stocks July 6th
Crude oil down -12.6 million barrels
Oil products down -0.7
Overall total, down -13.3 (shown on chart)
Natural Gas: Propane & NGPLs up +6.1 (not included in chart)
Weekly change in US total (oil + products) inventories
Chart: https://pbs.twimg.com/media/Dh1_SuAXUAcbc5M.jpg11/7/2018Hickory , 07/12/2018 at 11:12 am
US crude oil imports and exports update April 2018 data
http://crudeoilpeak.info/us-crude-oil-imports-and-exports-update-april-2018-dataYes indeed, excellent article as always Matt.
"Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence."
I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position.
Jul 06, 2018 | thenation.comMassive global inequality underlies our era of economic and political unrest. The rise of nationalist, populist movements, and the faltering influence of the Davos class of free-trade advocates, have rendered neoliberalism an ideology without committed ideologues. So what will bring about the end of neoliberalism -- the left? the right? the incompetence of the professional political class? -- and, when it's gone, what will replace it? We asked five of our favorite minds for their views on the direction we urgently need to go next.;
The dramatic effects of deindustrialization, automation, globalization, and the growing disparities of wealth and income -- including by race and region -- are undermining political norms in much of the West. 4
Activists and academics alike have linked these trends to the neoliberal ideology that has guided policy-making over the past several decades. This ideology has resulted in pushing the widespread deregulation of key industries, attempting to solve most social and economic problems through market competition, and privatizing public functions like the operation of prisons and institutions of higher education. Neoliberal ideas were considered such common sense during the 1980s and '90s that they were simply never acknowledged as an ideology. Now, even economists at the International Monetary Fund are willing to poke holes in the ideology of neoliberalism. Jonathan Ostry, Prakash Loungani, and Davide Furceri wrote in 2016: "The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda." 5
We know that neoliberalism has now provoked populist responses on the left and the right. But are either of them sufficient to end its rule? 6The left needs to stop playing defense. This means enacting policies like universal health care, free college, and ending the private-prison industry.
Left populism, if organized, could end the neoliberal order: As espoused by leaders like Pramila Jayapal and Keith Ellison, left populism demands public control as well as redistribution; it is pro-regulation, pro-state, and anti-privatization. These values are inherently at odds with the small-government, anti-regulatory tenets of neoliberalism. If an aggressive left-populist agenda is successfully implemented, neoliberalism would be defeated. The barrier to implementation is the left's inability to be consistent and organized. 7
Populism on both the left and right has proved difficult to organize and suffers from a lack of leadership. On the left, the struggle for organization has been playing out in the Democratic Party's leadership fights. Politicians and activists are attempting to close the ideological gap between the party's base and its leaders. Without enough trust to allow leaders to set and execute a well-resourced strategy -- to say nothing of the resources themselves -- the left faces huge obstacles to actually implementing an agenda that spells the end of neoliberal dominance, despite having an ideology that could usher in a post-neoliberal world. 8
Jimmy TobiasPaul Mason
Left populism can technically end neoliberalism. But can right-wing populism? 9
One should hope that right-wing populism doesn't become organized enough to end the neoliberal order. Public control is not a cogent ideology on the right. That leaves room for privatization -- a main pillar of neoliberalism -- to continue to grow. Only if right-wing nationalism turns into radical authoritarian nationalism (read: fascism) will its relationship with corporate power turn into an end to the neoliberal order. In the United States, this would mean: 1) the delegitimization of Congress and the judicial branch, 2) the increased criminalization of activists and political opponents, and 3) the nationalization of major industries. 10
Right-wing nationalism seems to be crafted to win electoral victories at the intersection of protectionist and xenophobic sentiments. Its current manifestation, designed to win over rural nativist voters, appears to be at odds with the pro-free-trade policies of neoliberalism. However, the lines between far-right nationalism and the mainstream right are blurring, especially when it comes to privatization and the role of government. In the United States, Trump's agenda looks more like crony capitalism than a consistent turn from neoliberal norms. His administration seems either unwilling or incapable of taking a heavy-handed approach to industry. 11
As with many of his business ventures, we've already seen Trump-style nationalism fail in his nascent administration. The White House caved to elite Republican interests with the attempt to repeal and replace the Affordable Care Act and with Trump's decision to stack high-level economic-policy roles with members of the financial elite. Trump's proclaimed nationalist ideology seems to be a rhetorical device rather than a consistent governing principle. It's possible that the same might be true for other right-wing nationalists. France's Marine Le Pen has cozied up, though admittedly inconsistently, to business interests; she has also toned down her rhetoric, especially on immigration, over the years in order to win centrist voters. Meanwhile, Dutch nationalist Geert Wilders notably lost to a more mainstream candidate in March's general elections. Yet the radical right is more organized in Europe than in the United States. We may not see the same level of compromise and incompetence as in the Trump administration. Moves toward moderation may only be anomalous and strategic rather than a sign of a failing movement. 12
So what does all of this mean for the future of neoliberalism, particularly in the American context? I believe there are two futures in which neoliberalism's end is possible. In the first, the left decides to stop playing defense and organizes with the resources needed to build sustained power, breaking down the policies that perpetuate American neoliberalism. This means enacting policies like universal health care and free college, and ousting the private-prison industry from the justice system. In the second future, a set of political leaders who have been emboldened by Trump's campaign strategy gain office through mostly republican means. They could concentrate power in the executive in an organized manner, nationalize industries, and criminalize communities who don't support their jingoistic vision. We should hope for the first future, as unlikely as it seems in this political moment. We've already seen the second in 20th-century Europe and Latin America. We cannot live that context again. 13Bryce Covert
Take the State 14
I wrote in Postcapitalism: A Guide to Our Future that if we didn't ditch neoliberalism, globalization would fall apart -- but I had no idea that it would happen so quickly. In hindsight, the problem is that you can put an economy on life support, but not an ideology. 15
After the 2008 financial crisis, quantitative easing and state support for banks kept the patient alive. As the Bank of England governor Mark Carney said last year at the G20 summit in Shanghai, central banks have even more ammunition to draw on should they need it -- for example, the extreme option of "helicopter money," in which they credit every bank account with, say, $20,000. So they can stave off complete stagnation for a long time. But patchwork measures cannot kick-start a new era of dynamism for capitalism, much less faith in its goodness. 16
The human brain demands coherence -- and a certain amount of optimism. The neoliberal story became incoherent the moment the state had to take dramatic steps to support a failing financial market. The form of recovery stimulated by quantitative easing boosted the asset wealth of the rich but not the income of the average worker -- and rising costs for health care, education, and pension provision across the developed world meant that many people experienced the "recovery" as a household recession. 17The one big cause that needs to animate us in the future is a systemic project of transition beyond capitalism.
So they began looking for answers, and the right had an easy one: Ditch globalization, free trade, and relatively free migration rules, as well as acceptance of the undocumented migrants who keep the economy working. That's how we get to Donald Trump, Marine Le Pen, Geert Wilders, Viktor Orbán, the Law and Justice party in Poland, and UKIP in Britain. Each of them has promised to make their country "great again" -- by diverting growth toward it and migrants and refugees away. 18
For 30 years, neoliberalism taught national elites that they were better off collaborating in the creation of a positive-sum game: Everybody wins, ultimately, even if your factory moves to China. That was the rationale. 19
Economic nationalism is logical if you believe that stagnation will last a long time, creating a zero-sum or even a negative-sum game. But the projects of economic nationalism will fail. This is not because economic nationalism has always been a losing strategy: Adolf Hitler practically abolished German unemployment within five years, and Franklin Roosevelt triggered a spectacular recovery and reindustrialization with the New Deal. But these were programs of another era, in which business models were primarily national and monopolies operated in the sphere of one big nation and its colonies; where the state was heavily enmeshed in the national economy; and where global trade was puny and economic migration low compared to now. 20
To try a repeat of autarky in the 21st century will trigger dislocation on a large scale. Some countries will win: It's even feasible that, although led by an imbecile, the United States could win. However, "winning" in this context means bankrupting other countries. Given the complexity and fragility of the globalized system, the cities of the losing nations would resemble New Orleans after Hurricane Katrina. 21
In the long term, for the left, the transition to a system beyond capitalism must be based on the possibility of a low-work, high-abundance society. This is the essence of the postcapitalism project that I proposed: automate work, replace wages with a basic income and heavy state provision of services, and enforce competition among the rent-seeking monopolies in order to force the price of their goods so low that people can survive scarce and precarious work. 22
As Manuel Castells's research group in Barcelona has found, as the market staggers, more and more people actually begin to adopt nonmarket survival tactics, mechanisms, and institutions like informal lending, co-ops, time banks, and alternative currencies. And that's the basis for an economic counterpower to big capital and high finance. 23
But in the short term, a whole generation of the left that reveled in aimlessness and horizontality needs to split the difference between that and effective, organized politics. Call it "diagonality," if you want: Without ceasing to care about the 100 small causes that have animated us in the past, the one big cause that needs to animate us in the future is a systemic project of transition beyond capitalism. For now, that project has to be pursued at the level of big cities, regions, states, and alliances of states -- that is, at scale. 24
The hardest thing for the old left to accept will be that this means using the existing, oppressive, imperfect state while simultaneously trying to democratize it. Street protests, mass resistance, strikes, and the occupation of squares are great ways to assemble the forces. But the arc of the story from 2011 to 2015 -- Occupy, the Indignados, and the Arab Spring -- shows that we have to do more than simply create a counterpower: We need to take power and diffuse it at the same time. 25William Darity Jr.
The Crisis of Care 26
American parents are being crushed between trying to care for their families and working enough hours to survive financially. This problem plagues parents of both genders, up and down the income scale, and it is upending the way Americans view the capitalist system. This crisis of care is fostering solidarity among the millions of Americans who share this challenge, as well as support for solutions that will end the reign of neoliberalism. 27
Among low-income Americans, especially people of color, both parents have often worked outside the home to make ends meet. Nonetheless, the ideal has been, until very recently, a stay-at-home mother and a father working for pay outside the home. World War II undermined this idyll, pushing women into factories as men went to fight abroad. The gauzy 1950s dream of single-earner families masked the reality that women continued to pour into the workforce. 28
Today, women make up about half of the paid labor force in the United States, including more than 70 percent of women with children. This means that in about half of married heterosexual couples, both the husband and wife work. This has given women far more access to the public sphere and, with it, greater status and equality both inside and outside the home. 29
But it's also meant a crunch for families. There is no longer a designated parent to stay home with the kids or care for aging relatives, and the workplace isn't designed to help with that predicament. Instead, work is devouring people's lives. 30
You can see this problem in the rising number of Americans who worry about their work/life balance. About half of parents of both genders say they struggle to reconcile these competing demands. Fathers are particularly freaked out: More than 45 percent feel they don't spend enough time with their children, compared with less than a quarter of mothers (probably because more women reduce their paid work to care for children). As the baby-boomer generation ages, a growing elderly population threatens to trap even more working people in the predicament of caring for aging parents, raising young kids, and trying to make a living. 31
The result has been that more and more people are being forced to reckon with the fact that capitalism's unquenchable thirst for labor makes a balanced life impossible. This, in turn, is fostering a greater sense of solidarity among them as workers struggling against the demands of corporate bosses. This growing crisis has already led to some policy-making. The expansion of overtime coverage by the Obama administration means that workers will either be better compensated for putting in long hours or have their schedules pared back to a more humane 40-hour work week (though it remains to be seen what will happen to the overtime expansion under President Trump). Legislation guaranteeing paid time off has swept city and state governments. These are policies that challenge the idea that we should give everything of ourselves to our jobs. 32
The crisis of care has also revived the notion that the public should deal with these shared problems collectively. While other developed countries have spent money to create government-funded solutions for child care over the past half-century, Americans have insisted child care remain a private crisis that each family has to solve alone. The United States provides all children age 6 to 18 with a public education, but for children under the age of 6, it offers basically nothing. Head Start is available to some low-income parents, and a smattering of places have started experimenting with universal preschool for children ages 3 and 4. Outside of that, parents are left to a pitiful private system that often doesn't even offer them enough slots, let alone quality affordable care. 33
Americans have increasingly come to recognize that this situation is ridiculous and are throwing their support behind a government solution. Huge majorities support spending more money on early-childhood programs. American parents haven't yet gone on strike against capitalism's endless demands on their time or the government's failure to provide public support. But the crisis is reaching a boiling point, and it's transforming our relationship to America's neoliberal system. 34Peter Barnes
A Revolution of Managers 35
Marx's classic law of motion for bourgeois society -- the tendency of the rate of profit to fall -- was the foundation for his prediction that capitalism would die under the stress of its own contradictions. But even Marx's left-wing sympathizers, who see the dominant presence of corporate capital in all aspects of their lives, have argued that Marx's prediction was wrong. It has become virtually a reflex to assert that modern societies all fall under the sway of "global capitalism," and that a binary operates with two great social classes standing in fundamental opposition to each other: capital and labor. 36
Suppose, however, that Marx was correct in his expectation that capitalism, like other social modes of production before it, will wind down gradually, but wrong in his expectation that it would be succeeded by a "dictatorship of the proletariat," a civilization without class stratification. Suppose, indeed, that the age of capitalism is actually reaching its conclusion -- but one that doesn't involve the ascension of the working class. Suppose, instead, that we consider the existence of a third great social class vying with the other two for social dominance: what was seen in the work of such disparate thinkers as James Burnham, Alvin Gouldner, Barbara Ehrenreich, and John Ehrenreich as the managerial class. 37Suppose, indeed, that the age of capitalism is reaching its conclusion -- but one that doesn't involve the ascension of the working class.
The managerial class comprises the intelligentsia and intellectuals, artists and artisans, as well as state bureaucrats -- a credentialed or portfolio-rich cultural aristocracy. While the human agents of global capital are the corporate magnates, and the working class is the productive labor -- labor that is directly utilized to generate profit -- the managerial class engages comprehensively in a social-management function. The rise of the managerial class is the rise to dominance of unproductive labor -- labor that can be socially valuable but is not a direct source of profit. 38
A surplus population under capitalism has a purpose: It exists as a reserve army of the unemployed, which can be mobilized rapidly in periods of economic expansion and as a source of downward pressure on the demands for compensation and safe work conditions made by the employed. Therefore, capital has little incentive to eliminate this surplus population. In contrast, the managerial class will view those identified as surplus people as truly superfluous. The social managers consider population generally as an object of control, reduction, and demographic administration, and whoever is assigned to the "surplus" category bears the weight of the arbitrary. 39
To the extent that identification of the surplus population is racialized, particular groups will be targets for social warehousing and extermination. The disproportionate overincarceration of black people in the United States -- a form of social warehousing -- is a direct expression of the managerial class's preferences regarding who should be deemed of low necessity. The exterminative impulse is evident in the comparative devaluation of black lives that prompted resistance efforts like the Black Lives Matter movement. The potential for black superfluity in the managerial age is evident in prescient works like Sidney Willhelm's Who Needs the Negro? (1970) and Samuel Yette's The Choice (1971), both published almost 50 years ago. 40
The assault on "big" and invasive government constitutes an attack on the managerial class by both capital and the working class. Despite endorsing military spending, receiving lucrative government contracts, and enjoying the benefits of publicly provided infrastructure like roads, highways, and railways, corporate capital calls for small government. This is a strategic route to slashing social-welfare expenditures, with the goal of reducing the wage standard and eliminating all regulations on corporate predations. Despite benefiting from social-welfare expenditures, the working class gravitates to a new brand of populism that blends anticorporatism with anti-elitism (and anti-intellectualism), xenophobia, and a demand for a smaller and less intrusive state. Since "big" government constitutes the avenue for independent action on the part of the managerial class, an offensive of this type directly undermines the "new" class's base of power. 41Calls for smaller government are a strategic route to slashing social-welfare expenditures, wage standards, and regulations on corporate predation.
But the managerial class also possesses another attribute that is both a strength and a weakness. Unlike capital and labor, whose agendas are driven to a large degree by the struggle over the character of a society structured for the pursuit of profit, the managerial class has no anchor for its ideological stance. In fact, it's a social class that is wholly fluid ideologically. Some of its members align fully with the corporate establishment; indeed, the corporate magnates -- especially investment bankers -- look much the same as members of the managerial class in terms of educational credentials, cultural interests, and style. Other social managers take a more centrist posture harking back to their origins in the "middle class," while still others position themselves as allies of the working class. And there are many variations on these themes. 42
Depending on where the ideological weight centers most heavily, the managerial class can take many directions. During the wars in southern Africa against Portuguese rule, Amílcar Cabral once observed that for the anticolonial revolution to succeed, "the petty bourgeoisie" would need to commit suicide as a social class, ceasing their efforts to pursue their particular interests and positioning themselves fully at the service of the working class. One might anticipate that the global managerial class will one day be confronted with the choice of committing suicide, in Cabral's sense, as a class. But the question is: If such a step is taken, will they place themselves fully at the service of labor or capital? 43
Universal Base Income 44
There is no single solution to economic inequality and insecurity in America, but there's one that could go further than any other. It's a universal base income, as distinct from a universal basic income. 45
A universal base income of a few hundred dollars a month is not the same as a universal basic income of, say, $1,000 a month. The latter, at least in some places, is enough to survive on; the former decidedly is not. And while the latter is the dream of many, it is far too expensive -- and threatening to America's work ethic -- to be enacted anytime soon. If a universal basic income ever happens here, it will be because it was preceded for many years by a universal base income, gradually nudged upward like Social Security and the minimum wage. So let's take a look at that. 46
A universal base income is both a springboard and a cushion for every participant in our fast-changing market economy -- like giving everyone $200 for passing "Go" in a game of Monopoly. It supplements, but does not replace, labor income (which for the last 30 years has stagnated or declined), and it does so without judgment or stigma. It is grounded on the principle that, in a prosperous albeit volatile and increasingly unequal economy, everyone has a right to some cash flow they can count on. 47
In practical terms, a universal base income would be simple to administer. Eligible recipients (anyone with a valid Social Security number, which can include legal immigrants) would receive an equal amount of money every month, wired to their bank accounts or debit cards. The system would look and feel like Social Security, or a monthly version of the dividends that all Alaskans receive. People who don't need the extra income would be enabled by a check-off option to donate it to any IRS-approved charity. 48
A universal base income, I should note, has nothing to do with automation, robots, or artificial intelligence. It has a lot to do with enhancing every American's security, reducing their stress, and giving our poor and middle classes a leg to stand on -- the very opposite of what our economy does now. 49
A universal base income would have other benefits as well. It is an answer -- perhaps the answer -- to long-term economic stagnation, a trickle-up form of Keynesianism that would stimulate our economy through increased household spending. Moreover, if funded by fees on unproductive activities like pollution and speculation, it would help solve two other deep problems of 21st-century capitalism: climate change and financial instability. And it wouldn't need to replace or reduce spending on current programs that benefit the poor, a regressive trade-off that conservatives favor but most progressives oppose. 50
There are six large demographic groups (with some overlap) that could form the core of a movement for a universal base income: millennials (the first generation of Americans destined to earn less than their parents), low-wage and on-demand workers (the so-called precariat), women (who still earn less than men and aren't paid at all for much of the work they do), African Americans (who suffer from past and present injustices), retired and near-retired workers (who can't live on Social Security alone), and poor people of all colors. Environmentalists might also link arms with the cause if one of the revenue sources is a tax on pollution. It will, of course, be no simple feat to persuade these diverse groups that what they can't achieve separately they may be able to achieve together. But it has happened before, and, in the post-Sanders era, it could happen again. 51
In the political realm, a universal base income would bring our nation together by affirming that we are all in the same economic boat. It would unite our desperate poor and our anxious middle class, young and old, women and men, white people and people of color. It would make millions of Americans less stressed, healthier, and perhaps even happier. And it could make many of us proud to be American. 52
Ready to Fight Back? Sign Up For Take Action Now
Fourscore and two years ago, Franklin Roosevelt's Committee on Economic Security produced the classic report that led to passage of the first Social Security Act. The report itself went beyond security for the aged. It proclaimed: "The one almost all-embracing measure of security is an assured income. A program of economic security, as we vision it, must have as its primary aim the assurance of an adequate income to each human being in childhood, youth, middle age, or old age -- in sickness or in health." 53
The committee added that, for reasons of political expediency, it was proposing only an assured income for the elderly, but it hoped that the rest of its vision would be implemented in the not-too-distant future. Much of it has been, but not all. A lifelong base income, along with health insurance for all, are the next pieces. 54
- Joelle Gamble Joelle Gamble is a graduate student in public affairs at Princeton University.
- Paul Mason Twitter Paul Mason is a columnist at The Guardian .
- Bryce Covert Twitter Bryce Covert is a contributor at The Nation and a contributing op-ed writer at The New York Times .
- William Darity Jr. William Darity Jr. is Samuel DuBois Cook Professor of Public Policy at Duke University.
- Peter Barnes Peter Barnes is the author of With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough .
Out From Under Capitalism
Atossa Araxia Abrahamian
The Rock-Star Appeal of Modern Monetary Theory
Jesse A. Myerson
Trumpism: It's Coming From the Suburbs
Economic Democracy and the Billion-Dollar Co-op
The Government Wouldn't Rein In the Banks' Predatory Practices -- Until These Tellers Stepped In
Steven Gurlen says: May 11, 2017 at 9:15 amWalter Pewen says: May 6, 2017 at 3:22 pm
All good articles. Darity in particular on "managerial class" who I would say are oligarch wannabees not recognizing their true allegiance. Credit and leases allow this group to live the lifestyle, sold and pushed upon them 401Ks, and stock ownership completes the charade.Wesley Decker says: May 5, 2017 at 12:09 pm
I appreciate Bryce Cover's analysis. What is happening, in the United States, is life at home is ceasing to exist. In large part due to the dual income requirement. Also a BIG issue on the coasts at least, is people building families (and everyone) simply cannot afford housing. How long can this go on? Here in California capitalism is working people to death on all levels. We used to have enviable lifestyles for the middle and working class both. Not now. It's truly evil.Doug Barr says: May 4, 2017 at 9:57 pm
Neoliberalism is Weber's Protestant Work Ethic dressed up by Milton Friedman to do battle with seventies Limits to Growth science. It argues that we inhabit a moral universe where rich and poor deserve what they have and don't have. The challenge posed by Limits to Growth, which has it that outcomes exhibit sensitive dependence to initial conditions, is a seen as a direct affront to such moral ordering.
All economic problems, in the neoliberal view, are attributable to sluggish growth, which is in turn the result of insufficient competition. The neoliberal agenda seeks to stimulate competition, suggesting that if countries are allowed to run deficits, the people's work ethic will suffer as a result.
The science instead considers what's necessary for populations of living organisms to survive and grow. It recognizes that shortages of necessary resources the result of excessive competition. In this view unconstrained competition is naturally at odds with a finite supply of resources, resulting in the economic problems we see.
Given the neoliberal experiment we've been engaged in since the seventies, we see economic growth is still sluggish and further, global economic inequality continues to increase. Yet if I consider what's likely to prove to be the undoing of moral universe theory, it's the reality that it's very sloppy theology.Robert Andrews says: May 4, 2017 at 12:17 pm
Razing our vertical economy will kill all the isms that are killing us. https://thelastwhy.ca/poems/2012/12/13/economy.html
I can see Joelle Gamble's assessment with either the left or the right taking over Neoliberalism. But he doesn't recognize that it is the Oligarchy that is in control and has a stranglehold on both the RNC and DNC to maintain its power.
The Right is desperate for change but has really no place to go. Our society has been pulled so far right that there is little to nothing for them to grasp on to display possibilities of improvement for the populous.
The Left are the ones who are poised to "Kill Neoliberalism." Joelle Gamble hides the fact that the establishment DNC is almost totally controlled by the Oligarchy and that there are already multiple organizations that are aggressively challenging them.
He also doesn't say a word about the most popular leader in country by far, Senator Sanders. Bernie Sanders' presidential primary election has provided a laser for the populous to see who the DNC really serves, by forcing them to reveal its ugly face behind their mask to maintain their power. Sanders has also provided the platform for issues that the populous has been rallying behind and has shown how the establishment squelches their needs with platitudes and deflection.
The Progressive Left will be the ones to take down Neoliberalism, what comes next is the real question. Will the Oligarchy be able to implement a fascist regime to maintain its control or will they be cut off at the knees by a socialist government?
Jul 15, 2018 | www.unz.com
Miro23 , Next New CommentJuly 14, 2018 at 1:04 pm GMT
If history is any precedent, empires without economic foundations, sooner or later crumble, especially when rising regional powers are capable of replacing them.
This is worth repeating. Empire and wars are expensive. For example the British world trade network was doing fine until the "Imperial" idea came along with wars and economic failure. The US is doing even worse in trying to fight its Imperial wars on credit.
The result is that Trump faces the real prospects of a decline in exports and popular electoral support – especially from those adversely affected by declining markets and deep cuts in health, education and the environment.
He may well be blindsided by a candidate who actually implements Trump's own election platform 1) no more wars 2) domestic infrastructure spending 3) stopping mass immigration 4) draining the swamp. Trumps electoral weakness is that didn't follow through on his promises.
The electoral oligarchy and the mass media will force him to retreat from the trade wars and surrender to the globalizing elites.
No doubt that the globalized elite want Friedman's "World is Flat" concept – profit maximizing world markets, world production, stateless corporations, free movement of labour and capital (without troublesome national identities) represented by an exclusive and vastly wealthy rootless elite ruling over a global worker hive. The "Empire" is only the military/enforcement side of this, with sanctions/wars against dissidents.
Trump is in the strange situation of having been elected to fight the Empire while needing elite Imperial support to stay in his job.
Jul 14, 2018 | www.zerohedge.com
by Tyler Durden Fri, 07/13/2018 - 18:45 12 SHARES Authored Ryan McMaken via The Mises Institute,
On the matter of immigration, even many commentators who support ease of migration also oppose the extension of government benefits to immigrants.
The idea, of course, is that free movement of labor is fine, but taxpayers shouldn't have to subsidize it. As a matter of policy, many also find it prudent that immigrants ought to be economically self sufficient before being offered citizenship. Switzerland, for instance, makes it harder to pursue citizenship while receiving social benefits.
This discussion often centers around officially recognized "welfare" and social-benefits programs such as TANF and Medicaid. But it is also recognized that taxpayer-funded benefits exist in the form of public schooling, free clinics, and other in-kind benefits.
But there is another taxpayer-supporter program that subsidizes immigration as well: the US military.Government Employment for Immigrants
Last week, the AP began reporting that " the US Army is quietly discharging Immigrant recruits ."
Translation: the US government has begun laying off immigrants from taxpayer-funded government jobs.
It's unclear how many of these jobs have been employed, but according to the Department of Homeland security, "[s]ince Oct. 1, 2002, USCIS has naturalized 102,266 members of the military ."The Military as a Jobs Program
Immigrants, of course, aren't the only people who benefit from government jobs funded through military programs.
The military has long served as a jobs programs helpful in mopping up excess labor and padding employment numbers. As Robert Reich noted in 2011 , as the US was still coming out of the 2009 recession:
And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. -- because all three have high concentrations of military and federal jobs.
He's right. While the private sector must cut back and re-arrange labor and capital to deal with the new economic realities post-recession, government jobs rarely go away.
Because of this, Reich concludes "America's biggest -- and only major -- jobs program is the U.S. military."
Reich doesn't think this is a bad thing. He only highlights the military's role as a de facto jobs program in order to call for more de jure jobs programs supported by federal funding.
Given the political popularity of the military, however, it's always easy to protect funding for the military jobs programs than for any other potential jobs programs. All the Pentagon has to do is assure Congress that every single military job is absolutely essential, and Congress will force taxpayers to cough up the funding.
Back during the debate over sequestration, for example, the Pentagon routinely warned Congress that any cutbacks in military funding would lead to major jobs losses, bringing devastation to the economy.
In other words, even the Pentagon treats the military like a jobs program when it's politically useful.
Benefits for enlisted people go well beyond what can be seen in the raw numbers of total employed. As Kelley Vlahos points out at The American Conservative , military personnel receive extra hazard pay "even though they are far from any fighting or real danger." And then there is the "Combat Zone Tax Exclusion (CZTE) program which exempts enlisted and officers from paying federal taxes in these 45 designated countries. Again, they get the tax break -- which accounted for about $3.6 billion in tax savings for personnel in 2009 (the combat pay cost taxpayers $790 million in 2009)– whether they are really in danger or not."
There's also evidence that military personnel receive higher pay in the military than do their private-sector counterparts with similar levels of education and training.
Nor do the benefits of military spending go only to enlisted people. The Pentagon has long pointed to its spending on civilian jobs in many communities, including manufacturing jobs and white-collar technical jobs.
This, of course, has long been politically useful for the Pentagon as well, since as political scientist Rebecca Thorpe has shown in her book The American Warfare State , communities that rely heavily on Pentagon-funded employment are sure to send Congressmen to Washington who will make sure the taxpayer dollars keep flowing to Pentagon programs.
Whether you're talking to Robert Reich or some Pentagon lobbyist on Capitol Hill, the conclusion is clear: the military is both a jobs program and a stimulus program. Cut military spending at your peril!Military Spending Destroys Private Sector Jobs
The rub, however, is that military spending doesn't actually improve the economy. And much the money spent on military employment would be best spent on the private, voluntary economy.
This has long been recognized by political scientist Seymour Melman who has discussed the need for "economic conversion," or converting military spending into other forms of spending. Melman observes :
Since we know that matter and energy located in Place A cannot be simultaneously located in Place B, we must understand that the resources used up on military account thereby represent a preemption of resources from civilian needs of every conceivable kind.
Here, Melman is simply describing in his own way what Murray Rothbard explained in Man, Economy, and State . Namely, government spending distorts the economy as badly as taxation -- driving up prices for the private sector, and withdrawing resources from private sector use.
Ellen Brown further explains :
The military actually destroys jobs in the civilian economy. The higher profits from cost-plus military manufacturing cause manufacturers to abandon more competitive civilian endeavors; and the permanent war economy takes engineers, capital and resources away from civilian production.
But, as a classic case of "the seen" vs. "the unseen," it's easy to point to jobs created by military spending. How many jobs were lost as a result of that same spending? That remains unseen, and thus politically irrelevant.
Military fan boys will of course assure us that every single military job and every single dollar spent on the military is absolutely essential. It's all the service of "fighting for freedom." For instance, Mitchell Blatt writes , in the context of immigrant recruits, "I'm not worried about the country or origin of those who are fighting to defend us. What matters is that our military is as strong as it can be." The idea at work here is that the US military is a lean machine, doing only what is necessary to get the job done, and as cost effectively as possible. Thus, hiring the "best" labor, from whatever source is absolutely essential.
This, however, rather strains the bounds of credibility. The US military is more expensive than the next eight largest militaries combined . The US's navy is ten times larger than the next largest navy. The US's air force is the largest in the world, and the second largest air force belongs, not to a foreign country, but to the US Navy.
Yet, we're supposed to believe that any cuts will imperil the "readiness" of the US military.Cut Spending for Citizens and Non-Citizens Alike
My intent here is not to pick on immigrants specifically. The case of military layoffs for immigrants simply helps to illustrate a couple of important points: government jobs with the military constitute of form of taxpayer-funded subsidy for immigrants. And secondly, the US military acts as a job program, not just for immigrants but for many native-born Americans.
In truth, layoffs in the military sector ought to be far more widespread, and hardly limited to immigrants. The Trump Administration is wrong when it suggests that the positions now held by immigrant recruits ought to be filled by American-born recruits. Those positions should be left unfilled. Permanently.
cougar_w Fri, 07/13/2018 - 18:53 PermalinkExpendable Container -> cougar_w Fri, 07/13/2018 - 18:58 Permalink
No you retarded fuck, the military is a taxpayer-funed merc army supporting the overseas hegemonic goals of American-style Corporatism . That the military is full of the sons and daughters of poor people is only because rich whites won't send their trustfund babies to kill brown people for oil.
Smedley Butler, 1935: " War is a Racket "
How anyone still gets this wrong is symptomatic of too much inbreeding.cougar_w -> Expendable Container Fri, 07/13/2018 - 19:12 Permalink
The military is a taxpayer-funded merc army supporting Isra hell's goals none of which benefit the US.TeethVillage88s -> cougar_w Fri, 07/13/2018 - 19:08 Permalink
No, asshole. It's about money. About cash and gold. Profit. Markets. Growth. About cheap or free resources. Access to labor. New customers.
War makes companies rich, it might be the ONLY way they can get rich. War is waged when GM wants to sell trucks to the Pentagon. When Boeing wants to sell jets. When MIT wants money for arms research. When NATO wants a reason to exist. The dogs of war are loosed when oil gets tight. When countries won't "accept our cultural freedoms". When trade agreements aren't enough to open up new markets.
Isreal has fleeting nothing to do with it, except maybe when war aligns with their perceived need for hegemony in their own sphere. But by loading all this on Isreal you encourage others to miss the real fox in the henhouse. You could wipe Isreal off the Earth tomorrow and still have wars for profit for a thousand years to come.
This nation was born in war. It has practiced war since that day and will be at war with the rest of the world until humans are killed to the last and the last ounce of profit from war is had.Idiocracy's Not Sure Fri, 07/13/2018 - 18:56 Permalink
or from systematic corruption of all US Institutions and the politicization of all US Institutions... you need a job, you want to work here, you say this, and you do this, ... tow the line, no politics, no whistleblowing,... and we won't blackball your ass from the industry... got it... u got debts, keep ur nose clean!Quantify -> Idiocracy's Not Sure Fri, 07/13/2018 - 18:58 Permalink
the US military has slacking pay.AudiDoug Fri, 07/13/2018 - 19:17 Permalink
Yes the pay sucks but you get more done before 8am than most people do in a week. But seriously its a pretty good gig in the long run. Medical care a decent retirement system, travel a chance to meet and integrate with different cultures and kill them...its pretty cool.Debt Slave Fri, 07/13/2018 - 19:22 Permalink
Excluding a small percentage, the military is much like the DMV. We have a cartoon vision of all enlisted being GI Joe, ready to grab a gun and fight evil. This in not the case at all. Most positions are very simple, repetitive bureaucratic positions. Really is a giant Jobs program to keep people busy.DingleBarryObummer Fri, 07/13/2018 - 18:59 Permalink
"The idea at work here is that the US military is a lean machine, doing only what is necessary to get the job done, and as cost effectively as possible."
Then why are we still in Afghanistan?
No need to answer, the question is rhetorical.
Jul 14, 2018 | peakoilbarrel.com
kolbeinh x Ignored says: 07/11/2018 at 6:11 pmI managed to erase my own comment on this. And my comment was simple, the only true measurement of market balance for oil going forward is global inventory level. Everything else is perhaps manipulation or guesses.Guym x Ignored says: 07/11/2018 at 7:31 pmI agree, with all the intentional and unintentional confusion it stays confused. I stay confused trying to figure out what is confused. Inventory levels will be the only clear measure of what is happening. US inventories should not be dropping fast, as we are about the only country with increased production, but we dropped over 30 million last month. That's really not small potatoes, as commercial stocks are just a little over 400 million. Though, I think the US will be one of the last that would hit the danger zone.Tita x Ignored says: 07/12/2018 at 3:57 pmGood point. My intention was not to give more confusion. These are forecasts from eia and, I always like to remind this, they forecasted Brent averaging 105$ for 2015 in the STEO of October 2014. They never forecast big surplus or deficit.Guym x Ignored says: 07/12/2018 at 4:35 pm
I messed with the numbers of the STEO from 2018 to guess when the are reliable. Inventory levels are accurate for the US from the monthly report, which is 3 months old (april for July STEO). Other inventory levels are less accurate, but stock changes are reliable from 4-5 month data.
Global inventories increased in April (0.74 Mb/d) and May (1.14 Mb/d). This would be quite a change, as April would be a record inventory build since January 2017, and it would be followed by another record. This have to be confirmed later.
So, now I know what I will look for in these STEO.You gave data that I did not use before, and understand better, now. You did not confuse.Eulenspiegel x Ignored says: 07/13/2018 at 3:55 amHow does this fit with production and consumption?AdamB x Ignored says: 07/11/2018 at 11:14 am
I thought we have still increasing consumption of about 1.5 mb/year, and production in April/May didn't jumped thad much – Opec flat and Permian already near it's pipeline bottleneck.
As much as I know, many storages are unknown, especially Opec / China. There are these satellite measurements, but there are additional deep storages.
Gathering all comsumption / raffinery input / production data would give an additional picture. Still not easy.
With 1mb/day surplus we should go soon into the next oil price crash to 30-40.
Permian price is then at 0-10$.Even if we haven't hit peak yet, the fact that production is likely to be going up by a snail's pace the next 3 years is a problem. If consumption just goes up 0.75% a year we need 600K extra a year. That seems like a big challenge to a layman like myself.Timthetiny x Ignored says: 07/11/2018 at 12:57 pmWell what will happen is that the price of oil will hit $150-$200 a barrel to ration demand.Fernando Leanme x Ignored says: 07/11/2018 at 1:51 pm
Which will cause much pain and ruction and gnashing of teeth among the voters, but Europe has had those oil equivalent prices owing to taxation for quite some time and they manage high living standards. $200/bbl probably destroys 10 million a day in superfluous 'Becky driving by herself to the mall in a 3 ton SUV for no reason' kind of demand and incentivizes quite a bit of production.
The transition period will be moody for sure, but at $200/bbl, the amount of economic EOR targets in the US is somewhere in excess of 70 BBO from old conventional fields from the industry reports I have seen – its just not economic to do since there isn't enough CO2 available to flood them, so you need to use more expensive techniques which require very high prices (ethane flooding might be useful????). Worldwide its hundreds of billions. High prices that encourage us to use the resource wisely and not waste the goddamn stuff liberally would be a godsend, if we could quit wasting gigatons of plastic bullshit and 40% of our food – i.e. if everything made from oil was more expensive as well.
It would be painful economically, but Mad Max isn't coming our way. After 5 years of pain, we might actually finally get our shit together and research some goddamn alternatives.I believe sugar cane ethanol is very competitive at $120 per barrel. This allows converting grass cattle grazing ground to cane. I believe soy and palm will also become very attractive crops. And I suspect countries like Haiti and Nicaragua will continue having riots.kolbeinh x Ignored says: 07/11/2018 at 4:32 pmYes, I believe you are right. The future energy picture is complex, but authors writing books about this say sugar cane ethanol could have EROEI (energy return on energy invested) of up to 4. Even based on mechanised agriculture. And the big advantage of this crop is that it is not very nitrogen intensive, the biggest fertilizer, currently energy intensive when it comes to natural gas usage. Even when it comes to preindustrial crop rotation, the nitrogen intensive main food crops were often rotated with legume crops which were not nitrogen intesive in the hope to rebuild nitrogen content in the earth. So very long term, sugar cane ethanol is a superb type of renewable energy. (that is what I read, no expert).
Brazil has the biggest potential out there when it comes to size, and it is not inconceivable that they can cover much of domestic fuel demand with this outside aviation and possibly shipping (no need for diesel and gasoline ;-)). It would be in competition with food crops and concerns about deforestation, but still; a big potential there. Brazil is well off in a more renewable future btw, having loads of hydro power, wind power, in addition to biomass power (sugar cane the most promising).
Jul 14, 2018 | peakoilbarrel.com
Boomer II x Ignored says: 07/13/2018 at 6:11 pmFrom the WSJ Exxon story.Boomer II x Ignored says: 07/13/2018 at 3:46 pm
"[Exxon's] approach is a gamble in a new era of energy breakthroughs such as fracking and electric vehicles. Many of Exxon's competi-tors are transforming their businesses to move away from oil exploration, and have begun to spend carefully and diversify into renewable energy ."
"'Most investors like Exxon, but they like other companies better,' said Mark Stoeckle, chief executive of Adams Funds, which owns about $100 million in Exxon shares. 'The market is not willing to reward Exxon for spending today in hopes that it will bring good returns tomorrow.'
"Exxon has been pledging to produce more oil and gas for years, but its output of about four million barrels a day is no higher today than it was after its merger with Mobil Corp. in 1999. Even if Exxon succeeds in doubling last year's earnings of $15 billion (excluding impairments and tax reform impacts) by 2025, as Mr. Woods vowed in his eight-year spending plan, it would still be making far less than in 2008, when it set what was then a record for annual profits by an American corporation, at $45 billion .
"Exxon's fracking prospects in the Permian basin in West Texas and New Mexico, developed by its XTO unit, remain among its most profitable opportunities, the company says. Still, its U.S. drilling business has lost money in 11 of the last 15 quarters."The Wall Street Journal has a big article on Exxon. I won't bother with a link because you won't be able to see it if you aren't a subscriber.
Basically it says we've seen peak Exxon.
Jul 14, 2018 | beyondmoney.net
Fake News, Fake Money, How to Tell the Difference Posted on February 21, 2018 | Leave a comment Why is it so hard these days to tell fact from fiction? Who can be trusted to tell us what's really going on? Can the New York Times and Washington Post still be believed? And what about money? Can we still trust the dollar, the euro, the pound sterling? What supports national currencies, anyway? Is this Bitcoin thing real or fake money, and should I buy some?
Here's a compelling presentation by Andreas Antonopoulos, that addresses all of these questions. Antonopoulos is a technologist and entrepreneur and probably the most knowledgeable and insightful expert on bitcoin, blockchain technology and the profound changes that lie just ahead.
Here's the YouTube link: https://youtu.be/i_wOEL6dprg
Now take a deep dive into the political realities of our time by watching this presentation by CIA officer Kevin Shipp, in which he exposes the Shadow Government and the Deep State. If you question his credibility here is a brief bio from Information Clearing House:
Kevin Shipp, former Central Intelligence Agency (CIA) officer, intelligence and counter terrorism expert, held several high-level positions in the CIA. His assignments included protective agent for the Director of the CIA, counterintelligence investigator searching for moles inside the CIA, overseas counter terrorism operations officer, internal security investigator, assistant team leader for the antiterrorism tactical assault team, chief of training for the CIA federal police force and polygraph examiner. Mr. Shipp was the senior program manager for the Department of State, Diplomatic Security, Anti-Terrorism Assistance global police training program. He is the recipient of two CIA Meritorious Unit Citations, three Exceptional Performance Awards and a Medallion for high risk overseas operations. Website/book: fortheloveoffreedom.net
Here's the YouTube link: https://youtu.be/rQouKi7xDpM
Jul 14, 2018 | www.zerohedge.com
shortonoil -> SRSrocco Sun, 07/08/2018 - 16:00 PermalinkSRSrocco -> shortonoil Sun, 07/08/2018 - 16:55 Permalink
Hi Steve, this is exactly what we have been talking about for the last 8 years. To make matters worse there seems to be a completely irrational belief that Shale will save the day. Outside of the fact that shale is not processable without heavier crude, and it is at best energy neutral, and probably negative, it is also long term unaffordable. There are 1.7 million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to be replaced to just keep production even. That will be $6.2 trillion even if done on the cheap. $6.2 trillion is equal to the total cost of all the finished product that will be consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales revenue to produce 5 years of oil is just not going to happen!
There seems to be a black out on this terrible situation. Some of that may be just plain ignorance, but I suspect that the main reason is that it is politically unspeakable. For that reason nothing is being spoken. As I have been saying for some time no one should expect big oil, big government, or big anything to come riding to the rescue. The individual is now completely on their own. Chose your options with discretion.
http://www.thehillsgroup.org/Zen Xenu -> SRSrocco Sun, 07/08/2018 - 19:48 Permalink
Agreed. The U.S. Shale Oil Ponzi Scheme will likely begin to disintegrate within the next 1-3 years. Already, the Permian oil productivity per well has peaked.
Then when the next Shale Oil ENRON event takes place... watch as the dominos fall.
steveMrNoItAll -> SRSrocco Sun, 07/08/2018 - 21:21 Permalink
@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices.
Once cheap credit dries up and the previous debts are unable to be paid by drilling new wells, the entire scheme falls apart.
Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.
Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will catch up with a vengence. Rising interest rates will be the catalyst. Rising oil prices only prolong the increasing debt.Cloud9.5 -> Anonymous_Bene Mon, 07/09/2018 - 07:23 Permalink
Didn't the EIA publish something not long ago stating their concerns that we could see oil shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out and stated that without more investment, we would likely see oil shortages by 2020. And then at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which of course is not going to happen. It has been a long slow grind since 2008 to get to this point, but from here on out I anticipate that things will start unraveling at an ever faster pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some other world leader comes out and says we are running short on energy. Instead it will be Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.EddieLomax -> JamcaicanMeAfraid Mon, 07/09/2018 - 04:33 Permalink
This is a synopsis of the German Army study produced in 2010. https://www.youtube.com/watch?v=ZyUe7w1gDZo
If you want the English translation of the study in its entirety, it can be found here: https://www.permaculturenews.org/files/Peak%20Oil_Study%20EN.pdf
The mitigation section of the study was most telling. It simply stated that local sustainable economies would replace the modern era. These economies included local food production and energy production. As this process unfolds, I simply do not see how a high rise is going to remain habitable.Chief Joesph Sun, 07/08/2018 - 13:02 Permalink
Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more in that it earned in the previous 7 years (mining in general), so more investment wouldn't have been coming in the US anyway - the price wasn't high enough to justify it.
Worldwide we are going to see some almightly crunch, whether it will arrive after 2020 will be seen. Ironically it might save Trump anyway if the world is seen to be beset by a oil supply crunch since its hard to blame that on him.El Vaquero -> Chief Joesph Sun, 07/08/2018 - 13:31 Permalink
The U.S. needs to get off its dead ass and start developing better batteries, solar power, and other alternative energy sources. This was talked about in 1973, during the Oil Embargo days, and its just astonishing the U.S. has done little since to ween itself off of oil. And now we now have a tariff against Chinese made solar panels. DUH!!! How dumb can you get?bshirley1968 -> El Vaquero Sun, 07/08/2018 - 14:10 Permalink
Look at the energy density of those power sources. You'll never run an industrial civilization off of them. Electric cars may be great for zipping a couple of people around town from day to day, but you're never going to run the large mining and shipping equipment needed for our society. If you want to do that, you're going to have to develop viable breeder reactors and the technology to manufacture liquid fuels with that energy - and this is doable.
Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and utilized by the modern industrial society. Nothing......
What needs to happen right now is a steady rise in prices that will condition our population to start learning to do with less cheap, easy energy. We have got to curb usage to give society a chance to begin to learn another way.
The major obstacle to doing this responsible, rational action? The egregious, criminal banking system that has gotten the world awash in debt to feed their greed. Any cut back in the use of energy will destroy the economy and their gravy train.
Jul 13, 2018 | www.project-syndicate.org
America the Loser Jul 4, 2018 J. Bradford DeLong Donald Trump's unhinged recent attacks on the iconic motorcycle maker Harley-Davidson distill his larger assault on American democracy. Even if Democrats do manage to retake one or both houses of Congress this November, the damage that Trump and Republican leaders have done to the country's global standing cannot be repaired.
BERKELEY – The Washington Post's Catherine Rampell recently recalled that when US President Donald Trump held a session for Harley-Davidson executives and union representatives at the White House in February 2017, he thanked them "for building things in America." Trump went on to predict that the iconic American motorcycle company would expand under his watch. "I know your business is now doing very well," he observed, "and there's a lot of spirit right now in the country that you weren't having so much in the last number of months that you have right now."
What a difference a year makes. Harley-Davidson recently announced that it would move some of its operations to jurisdictions not subject to the European Union's retaliatory measures adopted in response to Trump's tariffs on imported steel and aluminum. Trump then took to Twitter to say that he was, "Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag." He then made a promise that he cannot keep: " ultimately they will not pay tariffs selling into the EU."
Then, in a later tweet, Trump falsely stated that, "Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand," and that "they were just using Tariffs/Trade War as an excuse." In fact, when the company announced the closure of its plant in Kansas City, Missouri, it said that it would move those operations to York, Pennsylvania. At any rate, Trump's point is nonsensical. If companies are acting in anticipation of his own announcement that he is launching a trade war, then his trade war is not just an excuse.
In yet another tweet, Trump turned to threats, warning that, "Harley must know that they won't be able to sell back into U.S. without paying a big tax!" But, again, this is nonsensical: the entire point of Harley-Davidson shifting some of its production to countries not subject to EU tariffs is to sell tariff-free motorcycles to Europeans.
In a final tweet, Trump decreed that, "A Harley-Davidson should never be built in another country – never!" He then went on to promise the destruction of the company, and thus the jobs of its workers: "If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!" 1
Needless to say, none of this is normal. Trump's statements are dripping with contempt for the rule of law. And none of them rises to the level of anything that could be called trade policy, let alone governance. It is as if we have returned to the days of Henry VIII, an impulsive, deranged monarch who was surrounded by a gaggle of plutocrats, lickspittles, and flatterers, all trying to advance their careers while keeping the ship of state afloat.
Trump is clearly incapable of executing the duties of his office in good faith. The US House of Representatives and Senate should have impeached him and removed him from office already – for violations of the US Constitution's emoluments clause , if nothing else. Barring that, Vice President Mike Pence should have long ago invoked the 25th Amendment, which provides for the removal of a president whom a majority of the cabinet has deemed "unable to discharge the powers and duties of his office."
And yet, neither Speaker of the House Paul Ryan nor Senate Majority Leader Mitch McConnell nor Pence has dared to do anything about Trump's assault on American democracy. Republicans are paralyzed by the fear that if they turn on Trump, who is now supported by roughly 90% of their party's base, they will all suffer at the polls in the midterm congressional election this November.
It is nice to think that the election will fix everything. But, at a minimum, the Democratic Party needs a six-percentage-point edge to retake the House of Representatives, owing to Republican gerrymandering of congressional districts. Democrats also have to overcome a gerrymandering effect in the Senate. Right now, the 49 senators who caucus with the Democrats represent 181 million people, whereas the 51 who caucus with the Republicans represent just 142 million people. 3
Moreover, the US is notorious for its low voter turnout during midterm elections, which tends to hurt Democratic candidates' prospects. And Trump and congressional Republicans have been presiding over a relatively strong economy, which they inherited from former President Barack Obama, but are happy to claim as their own.
Finally, one must not discount the fear factor. Countless Americans routinely fall victim to social- and cable-media advertising campaigns that play to their worst instincts. You can rest assured that in this election cycle, as in the past, elderly white voters will be fed a steady diet of bombast about the threat posed by immigrants, people of color, Muslims, and other Trump-voter bugaboos (that is, when they aren't being sold fake diabetes cures and overpriced gold funds).
Regardless of what happens this November, it is already clear that the American century ended on November 8, 2016. On that day, the United States ceased to be the world's leading superpower – the flawed but ultimately well-meaning guarantor of peace, prosperity, and human rights around the world. America's days of Kindlebergian hegemony are now behind it. The credibility that has been lost to the Trumpists – abetted by Russia and the US Electoral College – can never be regained. See also
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America's transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.
- American Democracy on the Brink Jun 29, 2018 Joseph E. Stiglitz says the US Supreme Court no longer provides a check on legislative, executive, and corporate abuses of power.
- Trump's Psychopathology Is Getting Worse Jul 3, 2018 Jeffrey D. Sachs & Bandy X. Lee believe that the US president's paranoia and sadism are intensifying – portending severe damage to the world.
- Reading the Signs of the Times Jul 9, 2018 Ian Buruma
- The Global Economy's Uncertain Future Jul 9, 2018 Jim O'Neill
- The European Union's Dublin Conundrum Jul 10, 2018 Daniel Gros
- A "Reagan Moment" for International Trade? Jul 9, 2018 Mohamed A. El-Erian
- Benign Brodwicz Jul 9, 2018
Obama was a Manchurian Candidate for the globalist banks and corporations and their war-mongering Deep State that would like to rule the world in perpetuity. Brad, the Democratic Party committed suicide with the Clintons. Obama was a rerun of Bush Jr. Trump is actually trying to put the Deep State down, and you should be supporting that. How many Stupid Wars till you see the light? How many more countries do you want to bomb in the name of Democracy? Syria has been stabilized, Brad. Hillary would not have done that.
- Michael Parsons Jul 9, 2018
" It is as if we have returned to the days of Henry VIII, an impulsive, deranged monarch who was surrounded by a gaggle of plutocrats, lickspittles, etc."
Henry V111th - very popular - in fact achieved a revolutionary transformation of England into a nation state, strengthened its navy and political existence - a process continued by the Queen Elizabeh 1. In this process foreign-dominated institutions of the Church were destroyed; and indeed many people were executed as necessary to achieve great social transformation, for such change cannot be made without the use of terror, as Robespierre rightly argued.
So for Trump let's wait and see, eh? Perhaps he is up to it.
- Robert Merrifield Jul 9, 2018
Rather that praise Obama and GDP growth surely the current President is simply an outcome of failures previously unrecognised by the author?
Perhaps the date should mark the end of neo-classical economics. You have widespread poverty and a populace who want change. Hardly the result of success.
Jul 10, 2018 | www.moonofalabama.org...Hours before Boris Johnson quit his position, Brexit Secretary David Davis resigned from Prime Minister May's cabinet.
On July 6 the British government held a cabinet meeting at Chequers, the private seat of the prime minister. Following the meeting it published a paper (pdf) that took a weird position towards exiting the European Union. If it would be followed, Britain would practically end up with staying in the EU, accepting nearly all its regulations and court decisions, but without any say over what the EU decides. The paper was clearly written by the 'Remain' side. The two top Brexiters in May's cabinet felt cheated and resigned. More are likely to follow.
The majority of the British people who voted to leave the EU must feel duped.
My hunch is that Prime Minister Theresa May was tasked with 'running out the clock' in negotiations with the EU. Then, shortly before the March 2019 date of a 'hard Brexit' would arrive without any agreement with the EU, the powers that be would launch a panic campaign to push the population into a new vote. That vote would end with a victory for the 'Remain' side. The UK would continue to be a member of the European Union.
Shortly before the original Brexit vote in June 2016 MoA headlined: BREXIT - Not Gonna HappenNo matter how the Brexit vote will go, the powers that are will not allow Britain to exit the European Union.Is that claim still justified?
Maybe Johnson the Brexiter can now launch an inner party coup and push Theresa May out. According to a YouGov poll she lost significant support within her conservative party. Besides the Brexit row she botched a snap election, lost her party's majority in parliament and seems to have no clear concept for anything. It would not be a loss for mankind to see her go.
Boris the clown, who wins within his party on 'likability' and 'shares my political outlook', would then run the UK. A quite amusing thought. Johnson is a man of no principles. While he is currently pretending to hold a pro-Brexit position he would probably run the same plan that May seems to execute: Delay as long as possible, then panic the people into a re-vote, then stay within the EU.
Then again - Boris may do the unexpected.
How do the British people feel about this?
Posted by b on July 9, 2018 at 11:43 AM | Permalink
Mark2 , Jul 9, 2018 12:07:09 PM | 2Did you notice how quickly th E U sided with the U K over Salisbury ? That was the deal.bevin , Jul 9, 2018 12:21:17 PM | 3
Remain in EU and we're back you!
Then again could have been we'l create a false flag you back us and we'll stay , a suttle nuonce.The likelihood is that the blairite faction in the Parliamentary Labour Party-which has no real political differences with the Tories and is fanatically pro EU, as all neo-liberals are- will prop up the May government. Or a Tory government headed by another Remainer, with Blairites in the Cabinet.John Zelnicker , Jul 9, 2018 12:23:35 PM | 4
This will prevent the General Election which Tories of all parties fear.
There is an excellent piece in the Boston Review on the EU- https://bostonreview.net/class-inequality/j-w-mason-market-police
Iy makes the point that "The European Union offers the fullest realization of the neoliberal political vision. Its incomplete integration -- with its confusing mix of powers -- is precisely the goal."
It traces the neo-liberal project, designed to prevent democracy from controlling economic policy, back to von Mises and Hayek. Nothing is more mistaken for critics of imperialism than to buy the line that the EU represents internationalism in any sense. The fact that some racists oppose the EU-just as others support it as a 'white" bastion -- is no reason to give an institution which is profoundly and purposefully undemocratic the benefit of the doubt.@Jeff - #1 - You are correct. There will not be another referendum.Babyl-on , Jul 9, 2018 12:24:52 PM | 5
I would add that there is some chance, however small, that on March 29th the British government will tell the EU that they just have no way to meet the requirements of Article 50 and would the EU please allow them to continue as a member of the EU and forget about all the shenanigans of the past 2 years. The EU has said previously that they will accept such a result and allow the UK to continue as a member. The Brexiteers will have a total meltdown, and May will most likely be thrown out of office, but most businesses and many individuals will be quite happy for this whole thing to just go away.
For those interested see https://www.nakedcapitalism.com/category/brexit which has been following the Brexit chaos since the beginning.Britain - PATHETICerik , Jul 9, 2018 12:58:47 PM | 13
It is a wondrous sight to see Western [neo]Liberal Democracy crumbling before our eyes. Have a look at the very founders and protectors of "freedom" corrupt to the very marrow of their bones.
In the US Trump, in the UK the Torys the democracies are now openly imperial and openly corrupt. Rule of law - ask the Skripals. Brexit, Russia, Skripals, Russia, junkies and poisons Russians - minority government - ministers resigning right and left deadlines looming no solutions in sight.
Western civilization is based on the Enlightenment and the Enlightenment and all its ideas of "democracy" are failing. Democracy is not a religion, it is not the end of history, it is not sacred and immutable - checks and balances have failed utterly. This sweetly written little essay says it all.
http://www.counterpunch.org/2016/01/14/the-end-of-the-enlightenment-a-fable-for-our-times-2/Look for countries to unilaterally bail from the EU with little or no advance notice. They will simply abrogate and that will trigger an avalanche of others joining in. There are various good economic reasons why they would do that, but I think the groundswell of populism fueled by anger over the open borders cataclysm will be the prime driver.Red Ryder , Jul 9, 2018 1:12:35 PM | 14Anything bad that can happen to the UK is well-deserved. The home, the womb of Russophobia, lies and illegal wars, as well as the hub of spying against American citizens, is exposed as thoroughly bankrupt politically.Al-Pol , Jul 9, 2018 1:19:11 PM | 15
The current path to chaos is well-trod. Now, we can expect national attention is on the team in Russia in the semi-finals, while the government crumbles and tumbles. But afterward, especially if Kane fails to bring the Cup home? Oh, the chaos. Of course, it will all be Putin and Russia's fault.
UK. Despicable. How long it has taken for folks to realize Theresa May always has been a stalking horse. Highly Likely the UK will stew in its own piss. Put that in their White Hall dossiers, and stamp it "Kremlin Plot".Britain won't be staying in the EU and nor will the EU be accepting May's fantasy ideas for a future relationship giving the UK free trade on everything it needs. There's a remote possibility that a new UK government could begin working on re-joining the EU (Article 49), but there are plenty in Europe who would not let the UK re-join, at least not in the near future.Charles Michael , Jul 9, 2018 1:41:25 PM | 16
Friday the 13th is coming soon, scary stuff ?
The "Don't take No for an answer" is rather misleading. Made to vote again ..only after changes to the Treaty. France's vote against the EU Constitution was accepted and when the Dutch also rejected it, it didn't happen.EU is bound to collapse but Britain might be tempted to wait it out, and maybe it is the game in London: not to be the first. The most dynamic destructive work in progress is the Euro that benefit to none of its 18 members (the euro-zones) but Geramny and Nederland. Italy has understood it but is using the refugees crisis to enlarge the contestation to non-euro zone countries (Visegrad group and more).Daniel Good , Jul 9, 2018 1:45:23 PM | 18
Now we have this Nato meeting coming and the abomination of Donald meeting Vlad that scares the whole neo-lberals, borgists, russian haters, warmongers.
As Nato is the real and only cement in this enlarged un-united Europe, in an epoch of accelerating change (collapse maybe) the famous Wait and see of the Brits has just muted in a slow fox-trot.Brits, especially the Leave voters, have no real idea what the consequences of leaving the EU are, nor do they care that much. What is uppermost in their minds is they do not want is to be in a union with "losers". Every single country on the Continent is a loser and thus the object of contempt. The only country in Europe that is not a loser (meaning they have never lost a war) is the United Kingdom of Roast Beef and God Save The Queen.b , Jul 9, 2018 2:08:45 PM | 19
This British loser-phobia also explains the island nation's guttural hatred of Russia, which has bailed out Europe, and so by definition the Brits as well, twice, thereby taking away some of the British luster. (OK the last time around they got a bit of help from their old colonies, the Yanks, but its all the same. Yanks and Brits are the same stock.) As far as EU goes the Brits can leave, no problem. Except that what the Continent would then be faced with was an American armed camp a few miles off shore, not an appealing prospect to say the least. But the puffed up Brits do not even see this danger and would blithely fall into the arms of the mafiosi from across the pond.Boris Johnson's resignation letter. Well written. Makes the same argument over the Checkers paper that I made above. If Johnson gets 48 back benchers on his side he could launch a vote on no-confidence against May and possibly become PM. The Conservatives in Parliament seem quite upset over all of this.Peter AU 1 , Jul 9, 2018 2:10:07 PM | 20@18dh , Jul 9, 2018 2:44:44 PM | 22
Brexit is rebellion against the US imposed world order. London money has gone along and profited from the US imposed order, but the ordinary Brits may not have. They may not know where they are going, but they do know where they do not want to be.@20 Not sure who qualifies as an 'ordinary Brit' these days. They come in all shapes and colours. I think the ones who moved to Spain are fairly happy with the EU status quo.psychohistorian , Jul 9, 2018 2:48:42 PM | 23Thanks for the posting bninel , Jul 9, 2018 3:11:03 PM | 29
I liked the "We are headed for the status of a colony" comment in the Johnson resignation letter
Getting the puppets to talk about the machinations of empire is a good thing for us but probably not good long term for empire.
No one ever said that evolving to a multi-polar world would be easy. All the ugly that kept the unipolar world together must be exposed as it dies.Allow me to enlighten.james , Jul 9, 2018 3:12:22 PM | 30
Dominic Raab is the new UK Brexit point-man. The previous guy, Davies, just resigned. But Raab's appointment, I think, points to what Brexit has been about all along -- namely, labour market reform beyond the rest of Europe, and to do this the UK must be free of the European Human Rights council and other protections it provides for workers in the member states.
Here is Raab's 2011 paper on employment standards and Brexit. https://leftfootforward.org/2011/11/dominic-raab-attack-on-workers-rights-based-on-no-evidence/ Have a look.@23 psychohistorian... ditto... status of colony... isn't that what the globalists, corporations, neo liberals and etc want? get rid of any national identity as it gets in the way of corporations having the freedom to rape and pillage as needed..NotBob , Jul 9, 2018 3:42:22 PM | 35
it was interesting reading near the end of bjs comments "Over the last few months they have shown how many friends this country has around the world, as 28 governments expelled Russian spies in an unprecedented protest at the attempted assassination of the Skripals." Guilty first - we will prove it later... maybe he really ought to consider rule from Brussels or where ever, if he can't fathom the concept of innocent until proven guilty...Al-Pol @ 15Pft , Jul 9, 2018 5:48:32 PM | 51
The French populace rejected the EU Constitution in 2005 during the Chirac years, and you are correct that after some changes it was accepted under the Sarkozy government.But that happened because it was the Assembly (the parliament, i.e., the political class) that voted on it, not the people. Can't have those deplorable citizens deciding important matters like that, now can we?According to this the EU was a US/CIA creation. Lol? https://www.zerohedge.com/news/2016-03-03/european-union-was-american-ideajames , Jul 9, 2018 5:59:35 PM | 52@51 pft... in so far as the cia work for the financial complex - yeah, probably.. how to create a currency - the eu - that no one has any real control over, to compete with the us$ and yen... makes sense on that level..Piotr Berman , Jul 9, 2018 6:37:17 PM | 53@Babyl-on | Jul 9, 2018 12:24:52 PM | 5Piotr Berman , Jul 9, 2018 6:37:17 PM | 53 somebody , Jul 9, 2018 6:38:22 PM | 54
Western civilization is based on the Enlightenment and the Enlightenment and all its ideas ...
When we discuss ALL ideas of the Enlightenment, we must remember this:
Wikipedia: "Enlightened absolutism is the theme of an essay by Frederick the Great, who ruled Prussia from 1740 to 1786, defending this system of government.
When the prominent French Enlightenment philosopher Voltaire fell out of favor in France, he eagerly accepted Frederick's invitation to live at his palace. He believed that an enlightened monarchy was the only real way for society to advance.
Frederick the Great was an enthusiast of French ideas. Frederick explained: "My principal occupation is to combat ignorance and prejudice ..."
In relatively short time, the List of enlightened despots included almost all absolute monarchs in Europe.
51 Much better summary on the CIA and the EU here .Ninel , Jul 9, 2018 6:47:54 PM | 55
From 2016The awful truth for the Leave campaign is that the governing establishment of the entire Western world views Brexit as strategic vandalism. Whether fair or not, Brexiteers must answer this reproach. A few such as Lord Owen grasp the scale of the problem. Most seemed blithely unaware until Mr Obama blew into town last week.
And then came Trump - pro BrexitDonald Trump, the presumptive Republican nominee for president, has come out in support of Brexit, saying the UK would be "better off" outside of the European Union and lamenting the consequences of migration in the continent.
The billionaire, who secured the backing of Republican voters on a staunchly anti-immigration platform, said that his support for the UK leaving the EU was a personal belief and not a "recommendation".
"I think the migration has been a horrible thing for Europe," Trump told Fox News late on Thursday. "A lot of that was pushed by the EU. I would say that they're better off without it, personally, but I'm not making that as a recommendation. Just my feeling."
And very anti-MerkelDonald Trump accuses Angela Merkel of making 'catastrophic mistake' on refugees. President-elect tells The Times and Bild that EU has become 'a vehicle for Germany'.
US President-elect Donald Trump said in a newspaper interview published on Sunday that German Chancellor Angela Merkel had made a "catastrophic mistake" with a policy that let a wave of more than one million migrants into her country.
In a joint interview with The Times and the German newspaper Bild, Trump also said the European Union had become "a vehicle for Germany" and predicted that more EU member states would vote to leave the bloc as Britain did last June.
"I think she made one very catastrophic mistake, and that was taking all of these illegals," Trump said of Merkel, who in August 2015 decided to keep Germany's borders open for refugees, mostly Muslims, fleeing war zones in the Middle East.
Trump has reversed some 70 years of US strategy to gain nothing. It is quite remarkable. Strategic vandalism is a good description.Even when the 'light' (read truth about Brexit) is revealed, many here choose to ignore it out of sheer ignorance. For a good description of the MOA comment section, one should consult Plato's Allegory of the Cave. And the 'left' blames external elements for its inaptitude and demise when many it has only itself to blame.Pft , Jul 9, 2018 7:27:36 PM | 56Somebody@54uncle tungsten , Jul 9, 2018 7:48:18 PM | 57
Good link, thanks
The thing about UK and the EU is the UK is basically the US 51st state and the US is a defacto commonwealth nation. The colonization of Europe by the US was never meant to encompass the UK and the City. As they are basically one and the same. Its presence in the EU was never really a problem though and was useful in terms of providing a guiding hand, so long as it remained free of the Eurozone. So I am not really sure its a change in strategy. Just another fork in the road.
It remains to be seen how it all works out. Perhaps the UK Brexit is meant to send a message to the other EU states as to the consequences of leaving. One benefit to the US neoliberals might be that UK scraps or at least scales back its NHS due to the economic consequences of a hard Brexit. The 0.1% will be fine at the end of the day and they are the only group that matters . The rest are just pawns on the board.
As for Germany. Immigration in the EU was all about divide and rule and leaving fewer Euros for social programs. All part of the neoliberal blueprint. Divide and rule is an age old tactic perfected by the British to rule the colonies. The EU and Germany being controlled by the Anglo-American ruling elite , and basically occipied by US controlled NATO opened the doors. Reversing this immigration can provide a plausible reason for more terrorism in Europe to empower the EU to become more of a security-police state like US and UK.
On a side note its interesting the head of the ECB and BOE are both former Goldman Sachs employees.
Another related link suggesting the EU also serves a purpose of isolating Russia economically.
https://www.globalresearch.ca/video-the-european-union-part-of-americas-imperial-project/5536396@Pft 51Peter AU 1 , Jul 9, 2018 7:57:17 PM | 59
EU could not possibly have been a US/CIA idea as it actually works. Yes it is undemocratic, usurps national aspirations, perverts local economies, coddles oligarchs, and all that. But that does not mean it is a US idea.
Zero Hedge is polishing turds now it seems.
Single union political aspirations have been around for centuries and in many countries. Dare I suggest that it is actually based on the Soviet Union of peoples and most likely a Leninist or Trotskyist plot!! :))))The Marshal Plan Copy and past from the linked page.bevin , Jul 9, 2018 9:25:30 PM | 61
"The Marshall Plan also established the creation of the Organization for European economic cooperation. It did this in a number of ways:
- promote co-operation between participating countries and their national production programmes for the reconstruction of Europe,
- develop intra-European trade by reducing tariffs and other barriers to the expansion of trade,
- study the feasibility of creating a customs union or free trade area,
- study multi-lateralisation of payments, and
- Achieve conditions for better utilisation of labour.
It was arguably through this persistent interlinking of many European countries economic affairs that to not cooperate would simply be too risky.
This provided the basis for European cooperation and this was favoured by many people because cooperation was seen as a fundamental building block in the establishment of long term European Peace."Daniel , Jul 9, 2018 9:33:58 PM | 62
@Piotr Berman@53"In relatively short time, the List of enlightened despots included almost all absolute monarchs in Europe."
You are right, and that included Catherine the Great for whom Samuel Bentham worked for some years. His brother Jeremy spent some time with him there and was a great admirer of Catherine and Potemkin. He was a key figure in the development of liberal ideology and political economy.
'The Enlightenment' is an historical concept which obscures more than it explains. To suggest that representative democracy's origins lie in this nebulous thing is completely misleading -- the truth is that democracy is as old as community. If anything 'The Enlightenment' movements are the beginning of the current system whereby the trappings of popular government are hung on the reality of a kleptocrats' oligarchy.Re. Australia: Have you read JOHN PILGER ON A HIDDEN HISTORY OF WOMEN WHO ROSE UP "?" I love that guy even more now.Daniel , Jul 9, 2018 9:37:25 PM | 63Just in time for Emperor Trump's arrival in Britain! I do not understand Great Britain's "democracy," (the very concept of an aristocratic House of Lords Peerage makes my head explode... and what's this about the Monarch having the authority to appoint a Prime Minister if he/she doesn't like the one selected?). But doesn't the party with the majority get to anoint the Prime Minister? Wouldn't that be Labour right now if Missy May is shown the door?Bevin Kacon , Jul 9, 2018 9:45:25 PM | 64Furthermore, the assertion that the UK will stay in the EU is entirely plausible. I heard, early in the days after the vote, that the govt had not expected it to go the way it did. Plans were made for a show of Brexit but that 'the idea is that everything stays the same' , i.e., no change. Sadly for the UK, the EU will not allow that to happen. In all probability, another vote will indeed be called. Otherwise, it's going to be a disaster for an already divided UK for many, many years to come!Bevin Kacon , Jul 9, 2018 9:48:27 PM | 65
The main problem with Brexit is that it is so complex that neither the officials who were set the task of drafting it knew little more than the Ministers themselves! NOBODY knew what the fuck to do! And they still don't!
There is every chance a Vote of No Confidence is going to be called on May's government and she will finally fall, as she must as she is the most inept PM there has probably ever been!@63 DanielDaniel , Jul 9, 2018 9:54:28 PM | 66
No, the Tories will still stay in power. A General Election would have to be called and I cannot see May's successor being that brave. Or stupid!What do the City of London, the Vatican and Washington DC have in common? Actually, Jerusalem shares many of the same traits. Bonus points for the most creative euphemism for "usurious bank."Daniel , Jul 9, 2018 10:20:56 PM | 67
Are terms such as "The Five Eyes" and "The AZ Empire" 'trumped' by all this nationalistic furor?
From my perspective, Nation-States have not been the loci of power for some time (if they ever really were). The US, with its awesome military might and (former) industrial capabilities has served as the enforcement arm of that usurious supra-national cabal throughout "the American Century."
But really, does anyone here really believe that a New York City conman or the latest British "mophead" is more powerful than the dynastic power of the Rothschilds, Warburgs or Morgans... or even the nouveau riche like the Rockefellers or Carnegies?
These are dynasties so wealthy and powerful that they don't even appear on Forbes lists of "The Richest" and no one dare mention their names when plotting the next global conflagration.Since David Cameron used Jimmy Cliff's " You Can Get It If You Really Want " for his campaign, Afshin Rattansi's interview with that truly revolutionary artist is not so off topic. And it's well worth 12 minutes to enter a worldview we Westerners rarely live.imo , Jul 9, 2018 10:28:10 PM | 68
I and I say "Ja Mon!"
OK. I can't post Jimmy without " The Harder They Come, " especially as that seems to be the root of most of the comments here.@33 -- "...and Western Australia were separate British colonies that all began as penal settlement."Kalen , Jul 9, 2018 11:49:40 PM | 69
Not entirely correct. Western Australia started as a capitalist investment venture (c. 1828) but suffered chronic labor shortages as slavery was closed down (c. 1833). The colony then resorted to convict imports for a time. Much of the myth about 'criminal' can be re-framed as political prisoners such as the Welsh Chartists (see Chartism in Wales).One can only be confused if one ignores public and secret reasons while Cameron threatened Brexit vote already in 2015 and went through it in 2016. Officially it was about antiterrorism, security and hence controlling immigration flagship of Tory political campaign that brought them overwhelming electoral win as well as some noises that EU rules and laws stifle economic development and the British lose more in EU payments than they gain.Penelope , Jul 10, 2018 12:35:31 AM | 70
Obtainimg strong mandate Cameron went to Brussels to supposedly negotiate better deal with EU ESPECIALLY for security while in fact he went there trying to bully the shape future EU integration especially in political realm and even more in realm of banking Union and integration and coordination of banking rules, laws and unified controlling authorities, via threatening Brexit which would be a deadly blow to EU propaganda glue that holds together this melting pot of divided as never before nations and never since medieval times united national elites integrated in EU ruling bureaucracy.
What Cameron was scared of as far as direction of future of EU?
First it was devastating impact of further EU integration on UK banking as London has become legal under U.K. law illegal in EU, money laundering capital of the world and criminal income is huge part of the revenue of the City , US is second.
And second point is future of British monarchy which further integration of EU into superstate would require to be abandoned in UK as elsewhere as states were to loose all even symbolic sovereignty and turn into regions and provinces as in Roman Empire . Needles to say that UK still powerful landed aristocracy want nothing of that sort.
Hence Cameron went to Brussels make special deal for UK and was essentially, with some meaningless cosmetic changes, rebuked into binary decision in EU or out of it no special deal and hence he escalated with calling Brexit vote as a negotiating tool only to increase political pressure to rig elections toward remain if deal reached . In fact as latest scandal revealed results of exit polls were released to stock market betting hedge funds just minutes before polls were closed concluding guess what, that remain campaign won while electoral data in hours showed Brexiters wining simply because to the last moment before closing polls they expected EU to cave in, they did not so they continued pressure by closing openly pro Brexit win.
The pressure continues now while Cameron had to pay political price as he openly advocated staying in EU under phony deal even Tory did not buy, and hence this seeming chaos now fooling people that there is other way but hard Brexit to keep monarchy sovereignty and profits from global money laundering or surrender and humiliation degradation U.K. into EU colony as BJ just said.
Of course which way it goes ordinary Brits will pay but also big crack will widen in EU as national movements will have impact of shattering dreams of quit ascending to EU superstate.At the passage of Brexit I believed the purpose to be to allow the City of London (the bankers) unlimited financial freedom, perhaps especially in their entering into agreements with the Chinese. This could not be the case under the original EU rules. It will be interesting to see how this works out.ben , Jul 10, 2018 1:02:19 AM | 71
The Chinese, as they are intended to be the regional governor of Asia under the evolving global governance are key to the entire tyrannical plan. The AGW hoax, paid for by Western oligarchs, is the public relations for the UN's Agenda 21, currently being enforced at the local level in many parts of the US.
The Chinese oligarchs are so delighted with its tyrannical land-use provisions that they are actually calling their projects "China's Agenda 21". You may search for it.
http://osnetdaily.com/2014/03/agenda-21-rockefeller-builds-human-settlement-zones-in-connecticut/ Exc introductory summary.
Corbett Report interview of Rosa Koire https://www.youtube.com/watch?v=L7T7ulzNG7o@ 62: Thanks for the Pilger article, a good read. There are many today, who would return us all to those days.Herman J Kweeblefezer , Jul 10, 2018 1:05:09 AM | 72The reality of the brexit which the Tory government is determined to raiload through has been designed by elites to better oppress the hoi polloi and to sell it to the masses it has been marketed as a means of restoring 'white power'. Bevin & co can whine on about the injustices of the eu for as long as their theoretical view of the world sustains them, but the brexit which will be delivered is based on 'pragmatic realism' developed by a really nasty gang of avaricious lying c**tfaces and will create a society far more unjust, divided and impoverished than the one that currently exists.Al-Pol , Jul 10, 2018 1:54:09 AM | 73
That is really saying something because the current version of the UK is one of the sickest, greed is good and devil take the hindmost societies I have ever experienced -- up there with contemporary israel and the US, 1980's South Africa and by the sound of it (didn't experience it firsthand like the other examples, all down to not existing at the time) 1940's Germany.
Jezza was great in the house last night but he didn't call for an immediate general election which would be pretty much SOP for any opposition facing as tattered a government (Seven cabinet 'resignations') as bereft of ideas as the Maybot machine.
The reason he didn't - couldn't in fact, is that the UK left is as divided and dug into their positions as that tory bunch of bastards. Far too many opposition politicians insist that a 'deal' on brexit comes first ahead of sorting out poverty and homelessness, woeful education outcomes (unless you believe wildly juked stats) and the horror show that has been created by three decades of relentless attacks on the health service.
We see it here from the brexiters so convinced of the rightness of their cause they ignore the institutionalised racism that will certainly follow a tory brexit. Or the remoaners who also ignore the unsavory aspects of eu policy to try and render the labour left impotent. Those latter types simply don't give a damn about anything which flows from this debate and division other than killing momentum, they consider even losing the next 5 elections to tories an agreeable sacrifice for ridding the party of Corbyn and co.
Corbyn has recognized the destructive divisiveness of Brexit and tries to ignore it because he holds with fixing the mess so many people are in as being much more important than theoretical arguments which will change nothing for the better regardless of impassioned exhortations by ninnies on both sides of the argument.
The thing which really pisses me off about the lefty brexiters, is that they behave as if it is a now or never situation, when it is anything but. There is nothing to prevent a more united Labour Party who have got their mandate by actually delivering a better life for people rather than irrelevant concepts, returning to sorting out the UK's position in the EU at a later date, ideally at a time when the EU's intransigent support for corporate welfare has run bang smack into a leftist UK Labour government's determination to restore public ownership of natural monopolies (rail, water, power, mail delivery etc).
The lefty brexiters claim the lefty remainers won't allow it, while the lefty remainers claim it is the lefty brexiters clogging the works. In fact it is both gangs of selfish egotistical assholes.NotBob @ 35.Peter AU 1 , Jul 10, 2018 3:31:38 AM | 75
The EU Constitution never happened. The Lisbon Treaty came along a couple of years later and this time round the Irish people voted against it. It got amended and the Irish people accepted it. The French and Dutch (and every other EU) country chose not to "ask the people" and left the decision to the peoples' chosen represtentatives.
The Irish Constitution has a bit in it making it necessary to ask the people before any changes can be made to that Constitution, so every time the EU adds some bits to the EU Treaty that require the Irish to change their own Constitution there's trouble, as those 3 million or so Irish people have the power to scupper anything and everything for the other 500 million EU citizens. Holding a national referendum to make decisions affecting the entire Union doesn't seem to be either fair or democratic. A single EU-wide referendum could be held when there's a major change to the Treaties.imo 68Peter AU 1 , Jul 10, 2018 4:24:50 AM | 76
Political correctness is a social disease very similar to syphilis - it fucks with the brain. You really should take precautions if socializing in those circles. Precautionary measures are available at all chemists and most public toilets.Correction to my post @75Peter AU 1 , Jul 10, 2018 4:50:46 AM | 77
Should have read - Political/ideological correctness is....I click on MoA now and see a pic of Boris the clown hanging from a rope. If the Brits were smart, they would connect that rope to a weather balloon and allow Boris to ascend to the stratosphere and cruise the jet stream.paul , Jul 10, 2018 4:55:55 AM | 79The EU is first and foremost a massive attack on democracy. At the same time it attempts to establish technocracy as the mode of government of the future. But right only racists and overly idealistic assholes oppose the EU...somebody , Jul 10, 2018 5:24:13 AM | 80Posted by: paul | Jul 10, 2018 4:55:55 AM | 79Mark2 , Jul 10, 2018 5:32:30 AM | 81
"Democracy" only being possible locally? Numbers I posted on another thread:
Members of the Shanghai Cooperation Organisation - population of 3 Billion+
- EU Members - population of 500 million.
- United States - population of 326 million
- GDP of United States - 18.57 trillion USD
- GDP of European Union - 17.1 trillion USD
- GDP China, India, Russia combined (Shanghai Cooperation Organisation) -
- close to 15 trillion
You think EU countries have got a competitive chance if on their own? Or - democracy in Switzerland enables them to decide on their relations with the outside world? Like not being part of the "single market" - they are -including free movement of people - yes you can live and work in Switzerland if you are a EU citizen.
But right only racists and overly idealistic assholes oppose the EU
Maybe because it is a stupid idea?Brexit is nether the problem or the solution, it was just another distraction to keep the mass occupied, whilst they assist stripped the uk and a large part of the world! The people we are scared to mention are the true people killing and oppressing us. I thank Daniel@66 for naming them ! Rothchild family ect ect I would add the Rothermere family and Murdoch ! Politics are debated, but history is made on the streets. We need to regain our sense of moral outrage (where did that go ?) there are 70 million displaced people in the world ! It could be. You or I next !ADKC , Jul 10, 2018 5:33:44 AM | 82Peter AU 1 @75Peter AU 1 , Jul 10, 2018 5:37:18 AM | 83
I don't read imo@68 as politically/ideologically correct but as a statement of fact. As far as I can see, imo didn't deserve your response.ADKCADKC , Jul 10, 2018 5:46:23 AM | 84
Well that's tough shit isn't it.Peter AU 1 @83Jen , Jul 10, 2018 5:56:25 AM | 85
Ignoring imo's 'feelings' what is wrong/objectionable about his posting @68?Peter AU 1 @ 83: I agree with ADKC and IMO. There were convicts transported to the Australian colonies whose crimes can be considered political crimes. The Tolpuddle Martyrs who came to the Sydney colony in the 1830s are one example: they were transported for the crime of demanding an extension of voting rights to all men, among other demands. Such convicts were a small minority though.Alan , Jul 10, 2018 6:37:23 AM | 88@bsomebody , Jul 10, 2018 6:41:49 AM | 89
Boris Johnson is no clown. You should look beyond the (carefully crafted) popular image and see the dangerous fascist lurking in plain sight.Posted by: Pft | Jul 9, 2018 7:27:36 PM | 56Mark2 , Jul 10, 2018 7:23:05 AM | 90
As for Germany. Immigration in the EU was all about divide and rule and leaving fewer Euros for social programs.
"The demonization of Muslim immigration to the EU ...." - fixed it for you.
The stuff about leaving fewer euros for social programmes is propaganda. Social programmes are designed to force people to work - they are pegged below the minimum wage.
In the case of Germany costs for refugees were accounted to the 0.7 percent of GDP Germany is supposed to spend for development aid by the UN, thereby effectively developing Germany instead.Alan @ 88Mark2 , Jul 10, 2018 7:49:20 AM | 92
I am in total agreement with you on your comment regarding Boris Johnson ! His childish buffoonery, is a commen system / tactic of a psychopath . It hides a callous disregard for human life , wins gullible friends which the psychopath manipulates to exploit there power and influence! They are very good at scheming there own self interested plan. But (and here's the crunch ) are totally useless at for seeing the consequences of there actions . And no regard for the victim of there actions!!! Do we want that in charge of the nuclear button ?Google ---Boris Johnson grenfail towerADKC , Jul 10, 2018 8:19:01 AM | 97Somebody @65Stubbs , Jul 10, 2018 8:22:30 AM | 98
There is nothing wrong/inconsistent with the idea of an interconnected world of sovereign (independent) states. The idea that a treaty or a trade agreement means that a state is no-longer independent is ridiculous. As ridiculous as believing that an individual who purchases a pack of polo mints is no longer free because of the need of a local shop and a manufacturer.
You are basically pushing the idea that there should be no nation states, no borders and all trade free and therefore no need for treaties. From this comes no regulation, a poisoned environment, uncontrolled and rapacious capitalism, no rights for people, no benefits, no protection, just work til' you die and polished off sharpish if you are no longer productive.
I don't object to an EU as a grouping of independent states acting collectively. I do object to an EU that erodes and undermines the nation state, that seeks to remove state leaders and interfere in state elections/policies. The EU that we have is the latter and there is no practical way to reform it to the former.@ B. You have too high an opinion of the competence of the main political figures in the UK Governing Party.Willy2 , Jul 10, 2018 8:28:30 AM | 99
Boris Johnson has never been a serious contender for PM. He's good at giving a rousing speech to the Party faithful but that's it. The blue rinses enjoy the titillation of his infidelities but they don't want someone so amoral coming anywhere near their daughters, or representing their principles.
You knew Theresa May had no judgment the first day of her premiership, when she made BoJo her Foreign Secretary. A selection that could kindly be described as risible. He indicated no suitability for the role before his appointment nor has since. Quite the opposite. It was at that decision you knew all was hopeless. Brexit was going to be hopeless. Everything she was going to be involved in was hopeless.
And so it has proved.
The vox pop that I encounter ..... the Remainers are reconciled to Brexit and just want to get on with it. The Brexiteers are sick to death with hearing about it but not seeing anything done. Everyone had made their minds up before the election in 2015. The Referendum campaign was a few weeks of premium entertainment watching the most reviled political figures in the land trying to tear each others' throats out.
Every brexiteer I've asked why they voted for out, begins by saying "For once they had to listen to us" and that's usually followed by "there's too many people here" or "it's the E.Europeans". (My response to the europhiles is that you knew the EU was finished a dozen years ago, when all the Big Issue sellers turned into Romanian women.) UK cities are thick with destitute E.Europeans.
There's a huge disconnect between Parliament (+ media) and the people. A further example of this is the official narrative on the Salisbury poisonings. Ask people in the street and they say "yeah, it was Vlad with the doorknob" and then they crease up laughing. The Govt has no credibility with its "only plausible explanation".
My prediction, since the day BoJo was appointed minister for the exterior, is that the situation is so catastrophic the EU will have to lead us by the hand through the process of brexit. The EU's priority will be the stability of the Euro. They won't want us beggared on their doorstep and as they export 15% of their stuff to us they'll want to keep on doing that. We'll have to have what we're given and be grateful.
The political situation in the UK is so far beyond surreal that a man dragging a piano with a dead horse on it would appear mundane.- It doesn't matter who the prime minister is. The UK has already adopted A LOT OF EU regulations/laws and that will make it nearly impossible to perform a "Hard Brexit". The UK still exports A LOT OF stuff to the Eurozone and then it simply has to follow EU regulations, no matter what the opinion of the government is. In that regard, the current EU regulation simply provides a good framework, even for the UK. No matter what one Mrs. May or Mr. Johnson.
- As time goes by the UK can change parts of the EU regulations to what the UK thinks those regulations should be.
- And do I think that Mrs. May and her ministers have drawn that same conclusion.
Jul 09, 2018 | www.zerohedge.com
THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline
by SRSrocco Sun, 07/08/2018 - 11:25 17 SHARES
By the SRSrocco Report ,
As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from its peak in 2014. If the world oil industry doesn't increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.
According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:
In the article, All-time low for discovered resources in 2017, Rystad reports , it stated the following:
"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, senior analyst at Rystad Energy. "The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) - compared to over 50% in 2012." According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%.
The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012. However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.
As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most. In the EIA's International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:
In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production. However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world isn't finding much more new oil.
I believe we are going to start running into serious trouble, first in the U.S. Shale Energy Industry, and then globally, within the next 1-3 years. The major global oil companies have been forced to cut capital expenditures to remain profitable and to provide free cash flow. Unfortunately, this will impact oil production in the coming years.
Thus, the world will be facing the Energy Cliff much sooner than later.
Check back for new articles and updates at the SRSrocco Report . Tags Business Finance Environment
He-He That Tickles Sun, 07/08/2018 - 12:44 PermalinkGoinFawr -> He-He That Tickles Sun, 07/08/2018 - 13:17 Permalink
Guess they better sell what's left really, really expensively.ThorAss -> GoinFawr Sun, 07/08/2018 - 15:11 Permalink
Yeah tHis article is ridiculous, resident ZH self-purported Mensa members like Tmos' have proven beyond any doubt that 'abiotic oil' replenishes the world's supply of easily accessed hydrocarbons every fifteen minutes or so, regardless of increasing consumption rates; indeed regardless of any veritable facts whatsoever.Zen Xenu -> ThorAss Sun, 07/08/2018 - 19:35 Permalink
Worked by whole life in the oil business. Depletion is real. Abiotic oil replenishment is Magic unicorns dancing on rainbows. Oil won't run out ever, but the energy required to extract the oil will make remaining oil reserves uneconomic at some point.DanDaley -> ThorAss Mon, 07/09/2018 - 06:17 Permalink
Well said. Agreed.ZIRPdiggler -> ThorAss Mon, 07/09/2018 - 06:27 Permalink
Hence Colin Campbell's book The End of Cheap Oil .Sid Davis -> GoinFawr Sun, 07/08/2018 - 16:12 Permalink
It went from the cost of one barrel to extract 100 back in the 19th century, to present day 5 barrels.GoinFawr -> Sid Davis Sun, 07/08/2018 - 18:03 Permalink
So I guess in your experience, oil wells don't go dry, ever.
But I wonder, why do you think the Saudis pump water into oil wells or the Mexicans pump in Nitrogen?
Shemp 4 Victory -> GoinFawr Sun, 07/08/2018 - 20:33 Permalink
"So I guess in your experience, oil wells don't go dry, ever."
indeed, regardless of any veritable facts whatsoever...
Thanks for comin' out!Victor999 -> GoinFawr Mon, 07/09/2018 - 01:21 Permalink
Good sarcasm is an underappreciated art form.Adahy -> Victor999 Mon, 07/09/2018 - 02:47 Permalink
Strange that the oil industry does not agree with you. And it's strange that reserves all over the world are not stable but decreasing. Your Mensa idol is full of shit.ebear -> Adahy Mon, 07/09/2018 - 08:16 Permalink
*whoosh* Right over the head.
I know /s is more difficult to detect with only text but damn, he was pretty obvious in his sarcasm.Slomotrainwreck -> GoinFawr Mon, 07/09/2018 - 06:41 Permalink
"...he was pretty obvious in his sarcasm."
Plain as day.
I was unaware of abiotic oil. Looked it up. Seems like a reverse shale oil scam to me. Not much profit motive to either explore or drill.
Jul 09, 2018 | www.unz.com
The fact that the US is facing a profound crisis, possibly the worst one in its history, is accepted by most observers, except maybe the most delusional ones. Most Americans definitely know that. In fact, if there is one thing upon which both those who supported Trump and those who hate him with a passion can agree on, it would be that his election is a clear proof of a profound crisis (I would argue that the election of Obama before also had, as one of its main causes, the very same systemic crisis). When speaking of this crisis, most people will mention the deindustrialization, the drop in real income, the lack of well-paid jobs, healthcare, crime, immigration, pollution, education, and a myriad of other contributing factors. But of all the aspects of the "American dream", the single most resilient one has been the myth of the US military as "the finest fighting force in history".
anonymous  Disclaimer , July 5, 2018 at 12:11 pm GMT
For Americans warfare is killing the other guy in his own country, preferably from afar or above, while making a ton of money in the process.
This is why I don't think there'll be any head-on clash between the US and Russia. It would violate the above principle. American wars are ones of predation, attacking weaker countries when the opportunity presents itself. It's a form of banditry, roving the world in search of the next victim. Parts of Asia, Africa and Latin America are all weak and subject to US whims. That there's a huge mythology attached to US military prowess is just part of the brainwashing that goes on. It's been a winning formula for the US which has avoided the massive casualty rates suffered by other countries. There's always the risk of miscalculation of course but US politics is mostly show biz so it's hard to assess what part of it's warhawk talk is real and what's showboating.
Jul 06, 2018 | peakoilbarrel.com
Michael B. x Ignored says: 07/04/2018 at 7:18 amA field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased. Things will go just great until the water hits those horizontal wells at the top of the reservoir. Then production will drop like a rock.eduard flopinescu x Ignored says: 07/04/2018 at 9:51 am
I assume this is the money quote. These methods comprise the "game changer" that scuttled peak oil predictions circa 2005.
By demurring a prediction as to when the stone might–will!–drop, you're acknowledging the deplorable state of the data. This should give us pause. We might call this the New Peak Oil Reticence.
Let's grant that what you say is true (I'm certainly not qualified to refute it). If you know it (that is, that the rock will drop), then "they" know it, and by "they" I mean those who are in the business of developing these "creaming" methods. They must know it.
So what the fuck are they thinking?I think only the big fields offer a cushion, in a way or the other, in the end it all depends a lot on Ghawar. Matt Simmons was right about that.George Kaplan x Ignored says: 07/04/2018 at 9:59 am
As I see it in a pyramid scheme if a big player suddenly wants to get out their money it's over.In IOCs they are mostly thinking how can I satisfy my boss and/or the stockholders enough in the next quarterly report to keep my job.
Jul 06, 2018 | peakoilbarrel.com
Ron Patterson x Ignored says: 07/04/2018 at 8:18 pmNo one producing country is looking at the global problem. They are only concerned with their own country and the problems at home. Most are old men who realize that they will be long dead if there is ever a catastrophe. And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse.Michael B x Ignored says: 07/05/2018 at 5:10 am
But the point is, the oil barons of each individual country, are not even remotely concerned with the collapse of civilization as we know it. They believe God, or Allah, or human ingenuity, will simply not allow that to happen."And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse."Ron Patterson x Ignored says: 07/05/2018 at 7:22 am
But doesn't that require, like, planning? Plenty of planning?Of course not. If someone else, or something else, is going to save you, you just sit back and let it happen. You do not need to do anything.Guym x Ignored says: 07/04/2018 at 8:10 amI think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.Ron Patterson x Ignored says: 07/04/2018 at 8:47 amYes, I agree with you on Dr. Minqi Li's paper. I am not sure, however, that the Permian will show enough yearly increase to hold off the peak until 2023.
Jul 06, 2018 | peakoilbarrel.com
In the table below I have converted the data Dr. Minqi Li presented in metric tons per year to million barrels per day. Again, this is C+C plus natural gas liquids.
2017 At Peak Year Peak BPD Increase us 11.47 15.08 2042 3.61 Saudi 11.29 12.17 2030 0.88 Russia 11.13 12.01 2033 0.88 Canada 4.74 7.85 2049 3.11 Iran 4.70 5.40 2039 0.70 Iraq 4.44 6.51 2042 2.07 China 3.S6 4.32 2015 UAE 3.53 4.38 2037 0.84 Kuwait 2.93 3.35 2040 0.42 Brazil 2.87 3.03 2025 0.16 Rest of W 27.13 33.22 2004 Total World 88.10 90.95 2021 2.85
The source for this chart is the same as the table above. I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate.
Well, all except three. The rest of the world did peak in 2004, China did peak in 2015, and the world will peak by 2021 or before. Congratulations to Dr. Minqi Li, the most accurate future peak there is the one that he calculated. Guym x Ignored says: 07/04/2018 at 8:10 amI think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.
Minqi Li x Ignored says: 07/04/2018 at 9:17 pmRon, many thanks for your very informative post about world oil (as always) and your comments on my post.
However, like much of the peak oil community, having missed some of the previous peak oil predictions, now I may err on the conservative side. Many have criticized the EIA projections and OPEC reserves. But again, even with those projections/reserves, the world oil production is still projected to peak in 2021. This suggests that world oil production may indeed peak in the near future. As I promised, I will follow up with part 2 on this.
Regarding China, China's oil consumption growth has re-accelerated as its oil production is in decline. This development may have some major impact on global economy/geopolitics in the coming years. On top of that, China is (or will soon become) the world's largest natural gas importer.
Jul 04, 2018 | peakoilbarrel.com
World cumulative oil production up to 2017 was 192 billion metric tons. The world's remaining recoverable oil resources are estimated to be 276 billion metric tons and ultimately recoverable oil resources are estimated to be 468 billion metric tons. By comparison, the BP Statistical Review of World Energy reports that the world oil reserves at the end of 2017 were 239 billion metric tons.
World oil production is projected to peak at 4,529 million metric tons in 2021.
2017 Production and Peak Production are in million metric tons; Cumulative Production, RRR (remaining recoverable resources or reserves), and URR (ultimately recoverable resources) are in billion metric tons. For Peak Production and Peak Year, regular characters indicate historical peak production and year and italicized blue characters indicate theoretical peak production and year projected by statistical models. Cumulative production up to 2007 is from BGR (2009, Table A 3-2), extended to 2017 using annual production data from BP (2018).
Jul 04, 2018 | www.henryckliu.com
Henry C K Liu
(Originally published as [US Dollar Hegemony has to go] in AToL on April 11. 2002)
There is an economics-textbook myth that foreign-exchange rates are determined by supply and demand based on market fundamentals. Economics tends to dismiss socio-political factors that shape market fundamentals that affect supply and demand.
The current international finance architecture is based on the US dollar as the dominant reserve currency, which now accounts for 68 percent of global currency reserves, up from 51 percent a decade ago. Yet in 2000, the US share of global exports (US$781.1 billon out of a world total of $6.2 trillion) was only 12.3 percent and its share of global imports ($1.257 trillion out of a world total of $6.65 trillion) was 18.9 percent. World merchandise exports per capita amounted to $1,094 in 2000, while 30 percent of the world's population lived on less than $1 a day, about one-third of per capita export value.
Ever since 1971, when US president Richard Nixon took the dollar off the gold standard (at $35 per ounce) that had been agreed to at the Bretton Woods Conference at the end of World War II, the dollar has been a global monetary instrument that the United States, and only the United States, can produce by fiat. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record US current-account deficits and the status of the US as the leading debtor nation. The US national debt as of April 4 was $6.021 trillion against a gross domestic product (GDP) of $9 trillion.
World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies. To prevent speculative and manipulative attacks on their currencies, the world's central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold more dollar reserves, making it stronger. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973.
By definition, dollar reserves must be invested in US assets, creating a capital-accounts surplus for the US economy. Even after a year of sharp correction, US stock valuation is still at a 25-year high and trading at a 56 percent premium compared with emerging markets.
The Quantity Theory of Money is clearly at work. US assets are not growing at a pace on par with the growth of the quantity of dollars. US companies still respresent 56 percent of global market capitalization despite recent retrenchment in which entire sectors suffered some 80 percent a fall in value. The cumulative return of the Dow Jones Industrial Average (DJIA) from 1990 through 2001 was 281 percent, while the Morgan Stanley Capital International (MSCI) developed-country index posted a return of only 12.4 percent even without counting Japan. The MSCI emerging-market index posted a mere 7.7 percent return. The US capital-account surplus in turn finances the US trade deficit. Moreover, any asset, regardless of location, that is denominated in dollars is a US asset in essence. When oil is denominated in dollars through US state action and the dollar is a fiat currency, the US essentially owns the world's oil for free. And the more the US prints greenbacks, the higher the price of US assets will rise. Thus a strong-dollar policy gives the US a double win.
Historically, the processes of globalization has always been the result of state action, as opposed to the mere surrender of state sovereignty to market forces. Currency monopoly of course is the most fundamental trade restraint by one single government. Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments.
A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods.
In 1795, when the Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in America, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.
A strong-dollar policy is in the US national interest because it keeps US inflation low through low-cost imports and it makes US assets expensive for foreign investors. This arrangement, which Federal Reserve Board chairman Alan Greenspan proudly calls US financial hegemony in congressional testimony, has kept the US economy booming in the face of recurrent financial crises in the rest of the world. It has distorted globalization into a "race to the bottom" process of exploiting the lowest labor costs and the highest environmental abuse worldwide to produce items and produce for export to US markets in a quest for the almighty dollar, which has not been backed by gold since 1971, nor by economic fundamentals for more than a decade. The adverse effect of this type of globalization on the developing economies are obvious. It robs them of the meager fruits of their exports and keeps their domestic economies starved for capital, as all surplus dollars must be reinvested in US treasuries to prevent the collapse of their own domestic currencies.
The adverse effect of this type of globalization on the US economy is also becoming clear. In order to act as consumer of last resort for the whole world, the US economy has been pushed into a debt bubble that thrives on conspicuous consumption and fraudulent accounting. The unsustainable and irrational rise of US equity prices, unsupported by revenue or profit, had merely been a devaluation of the dollar. Ironically, the current fall in US equity prices reflects a trend to an even stronger dollar, as it can buy more deflated shares.
The world economy, through technological progress and non-regulated markets, has entered a stage of overcapacity in which the management of aggregate demand is the obvious solution. Yet we have a situation in which the people producing the goods cannot afford to buy them and the people receiving the profit from goods production cannot consume more of these goods. The size of the US market, large as it is, is insufficient to absorb the continuous growth of the world's new productive power. For the world economy to grow, the whole population of the world needs to be allowed to participate with its fair share of consumption. Yet economic and monetary policy makers continue to view full employment and rising fair wages as the direct cause of inflation, which is deemed a threat to sound money.
The Keynesian starting point is that full employment is the basis of good economics. It is through full employment at fair wages that all other economic inefficiencies can best be handled, through an accommodating monetary policy. Say's Law (supply creates its own demand) turns this principle upside down with its bias toward supply/production. Monetarists in support of Say's Law thus develop a phobia against inflation, claiming unemployment to be a necessary tool for fighting inflation and that in the long run, sound money produces the highest possible employment level. They call that level a "natural" rate of unemployment, the technical term being NAIRU (non-accelerating inflation rate of unemployment).
It is hard to see how sound money can ever lead to full employment when unemployment is necessary to maintain sound money. Within limits and within reason, unemployment hurts people and inflation hurts money. And if money exists to serve people, then the choice becomes obvious. Without global full employment, the theory of comparative advantage in world trade is merely Say's Law internationalized.
No single economy can profit for long at the expense of the rest of an interdependent world. There is an urgent need to restructure the global finance architecture to return to exchange rates based on purchasing-power parity, and to reorient the world trading system toward true comparative advantage based on global full employment with rising wages and living standards. The key starting point is to focus on the hegemony of the dollar.
To save the world from the path of impending disaster, we must:# promote an awareness among policy makers globally that excessive dependence on exports merely to service dollar debt is self-destructive to any economy;
# promote a new global finance architecture away from a dollar hegemony that forces the world to export not only goods but also dollar earnings from trade to the US;
# promote the application of the State Theory of Money (which asserts that the value of money is ultimately backed by a government's authority to levy taxes) to provide needed domestic credit for sound economic development and to free developing economies from the tyranny of dependence on foreign capital;
# restructure international economic relations toward aggregate demand management away from the current overemphasis on predatory supply expansion through redundant competition; and restructure world trade toward true comparative advantage in the context of global full employment and global wage and environmental standards.
This is easier done than imagained. The starting point is for the major exporting nations each to unilaterally require that all its exports be payable only in its currency, so that the global finance architecture will turn into a multi-currency regime overnight. There would be no need for reserve currencies and exchange rates would reflect market fundamentals of world trade.
As for aggregate demand management, Asia leads the world in both overcapacity and underconsumption. It is high time for Asia to realize the potential of its market power. If the people of Asia are to be compensated fairly for their labor, the global economy will see its fastest growth ever.
Jul 03, 2018 | www.moonofalabama.org
karlof1 | Jun 29, 2018 5:51:08 PM | 32
Peter AU 1 @28--
The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980.
As I've said before, the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence.
Peter AU 1 , Jun 29, 2018 6:11:54 PM | 33karlof1 32uncle tungsten , Jun 29, 2018 9:25:02 PM | 41
What I am looking at are strategic reserves, not how much oil is currently produced. With shale it now has those reserves and shale oil I think is now at the point where production could quickly ramp up to full self sufficiency if required. Even if the US were producing as much oil as they consumed, they would still be importing crude and exporting refined products.
A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production.@Peter AU 1 #28 Thank you for that stimulating post. I just have to respond. And thanks to b and all the commenters here, it is my daily goto post.Peter AU 1 , Jun 29, 2018 9:25:04 PM | 42
The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors.
In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly.
I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good.
That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.
By gross ignorance and foolish under-investment, the USA of WAR and its coterie of killers have eaten their future at their people's expense.karlof1 32Peter AU 1 , Jun 30, 2018 4:07:22 AM | 65
This is the chart for US exports of crude and petroleum products.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTEXUS2&f=M61Peter AU 1 , Jun 30, 2018 4:30:22 AM | 67
Light sweet vs heavy sour. Light means it contains a lot of diesel/petrol. Sweet means low sulphur. Many oils are heavy sour. Canada sand. the stuff they get from that is thick bitumen with high sulpher. The sulpher needs to be removed and the bitumen broken down into light fuels like diesel and petrol.
Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets.
The great game for the US now is control or denial. Access to oil as a strategically critical resource is no longer a factor for the US."We're an empire now, and when we act, we create our own reality. And while you're studying that reality – judiciously, as you will – we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do." Karl Rove.
The squealing and consternation coming from the UK indicates that the empire has changed course and the UK is left sitting on its own shit pile.
Jun 28, 2018 | peakoilbarrel.com
Guymx Ignored says: 06/25/2018 at 6:18 pmhttps://seekingalpha.com/amp/article/4183852-game-oil-prices-going-higherGeorge Kaplan x Ignored says: 06/26/2018 at 12:41 am
Fun to look at this analysis, and plug in a one million shortage from North America. Obviously, there would not be a one million drop in Iran, as it would be sold somewhere.We might be seeing similar articles about gas over the next couple of years. Driving a bit less is maybe a good thing, pensioners and children freezing to death and industry shut down with rolling blackouts is maybe less negotiable.Watcher x Ignored says: 06/26/2018 at 12:58 amSuppose there is too little oil and the price doesn't change. Producing countries will be sure their own countries have a sufficient amount so regardless of price, that oil isn't leaving the country. It stays right there for consumption. External price is meaningless to that country, as it should be.George Kaplan x Ignored says: 06/26/2018 at 2:28 am
There are countries that produce about what they consume. Mexico is one. Argentina. Their oil isn't going anywhere. A higher price elsewhere tries to get it exported? Clearly the govt will stop anything like that. Just as the US did with its export ban in the 70s. Price doesn't matter if bans are in place.
Oh, and another annoying thing in that article. Something like . . . if supply shrinks, only "demand destruction" can avoid some sort of catastrophe. This is absurd. Demand is not destroyed. The desire for oil will grow with population. The population demands oil. It is consumption that is destroyed by lack of supply. Can't consume what doesn't exist.
Besides which, if some level of "grim" is approached, then some decision is going to be made to liberate that Orinoco heavy from the horrible popularly elected government that controls it. As I noted before, there is a large ethnic Russian population in Venezuela. The 1917 revolution sent many people there, fleeing confiscation. Liberation may not go smoothly.Mexico doesn't use what it produces, it doesn't have the refining capacity – it exports crude and imports products.Eulenspiegel x Ignored says: 06/26/2018 at 3:47 am
Invading Venezuela wouldn't necessarily stop the decline in production – their equipment and wells are falling apart, to get back to where they were a couple of years ago would require a five year occupation, probably with forced labour (or really high wages), and the investment money all coming from the invading country, with no net returns for longer than that.
Demand is usually defined with some relation to price, not assuming a commodity is free.If you would pay a tenth of the wage of an oil redneck in Texas, there would be long queues before the recruiting offices.
Forced labour is no good idea – especially when handling expensive equipment. Pay a good local! wage, and you'll have enough people.
You'll have to import foreign workforce, too, to rebuild this mess to modern standard. So billions will be needed before the oil starts flowing again.
Jun 27, 2018 | peakoilbarrel.com
George Kaplan x Ignored says: 06/27/2018 at 12:19 amI think if the world economy starts to drop, which is overdue and looking increasingly likely every time Trump opens his mouth, and keeps the oil price down then it's likely we'll be in a slow but accelerating decline. That might be a good thing – the further the peak is pushed out the steeper the decline when it comes.
What has surprised my most recently has been the fall in discoveries for oil and, maybe more so, gas, and with that the number of new fron tier plays that have been a bust. With the seismic and visualisation technology improvements the E&Ps should know better where and where not to drill. They seem to be more selective with falling wildcat numbers (and that is not much of a function of price that I can see as it has been happening since 2010) and yet the commercial discovery rates are staying fairly low. I can only interpret that as indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates in mature fields, and rising, and few new prospects how can there not be a peak?
The oil drop might have been more expected than the gas, and was predicted by some when peak oil was first mentioned, I think gas less so, but perhaps the price has had a bigger effect there. Whatever the cause many countries have been banking on ever rising supplies, either by pipeline or LNG, that might not be forthcoming.
Having said that simple economic arguments rarely seem to work as predicted, oil supplies would have peaked well before now without, mostly non-proftable, LTO; Venezuela production should be rising not a basket case; Saudi ministers spout out any thing that comes to mind to support flip-flop policies and their feud with Iran seems to be bubbling in the background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and target for higher production, which is 100% guaranteed not to be met even remotely.
At the moment the traders don't seem certain which way to turn – falling/rising supplies, short/long term demand rise/fall – you can see why they tend to fixate on US crude stocks, everything else is too complicated. The next few Wednesday/Thursday trading patterns will be interesting.
(ps if anything highlights the state of the oil industry at the moment it's that Fram, a two well, eight year life-cycle, gas condensate tie-back with about 10 mmboe reserves, has been the main headline news on at least four of the trade magazines this week.)
Jun 27, 2018 | peakoilbarrel.com
Guym x Ignored says: 06/27/2018 at 7:49 amhttps://www.rt.com/business/430902-russia-us-iran-oil-sanctions/amp/Kolbeinh x Ignored says: 06/27/2018 at 8:51 am
A little short by over 2 million a day. Perry has to know the Permian is on a hiatus for at least a year. That's probably over a million. Iran push is for another million. Yeah, that's a little short. Idiocy reigns. Russia just called for tariffs against the US. Any assistance from Russia ain't gonna happen.
The slow motion train wreck in progress. No one knows why the driver of the Lower for Longer Train has picked up speed down the curving stretch .Let us have fun now, because I am not sure the chaos at the station coming further down the stretch somewhere is equally funny.Guym x Ignored says: 06/27/2018 at 9:17 amOk, I'll forgo the train wreck series. Yeah, it's serious. So was the ridiculous pricing we've had for the past four years, and no one but the people who relied on oil income complained. There was not enough for capex to get new oil. The trainweck happened already.
Jun 27, 2018 | peakoilbarrel.com
Ron Patterson x Ignored says: 06/27/2018 at 3:44 pmUS oil exports boom to record level, surpassing most OPEC nationsGuym x Ignored says: 06/27/2018 at 4:31 pm
U.S. oil production is booming at record levels, and U.S. oil exports have also reached new highs -- 3 million barrels a day in the last week, according to government data.
Those exports are more than most OPEC countries can produce each day and only lag two OPEC countries, Saudi Arabia and Iraq, in terms of exports.
And if you read far enough down in that article they do mention imports, as if they hardly matter.
As U.S. production has grown, U.S. imports have decreased. The U.S. imported a relatively high 8.4 million barrels per day last week.
Okay, the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?We all agree that 2+ 2 = 5, but what we don't know is which one belongs to the thought police. I agree the Permian will produce 1.3 million this year, just take the rat cage off my head.Hickory x Ignored says: 06/27/2018 at 4:35 pm"the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?"
I think we can call it 'trump math'
Jun 26, 2018 | www.moonofalabama.org
karlof1 | Jun 26, 2018 4:25:16 PM | 11
CarlD @9 Et al--
At the just concluded OPEC meeting, Iran, Iraq and Venezuela were against any increase in extraction, while the Saudis wanted an increase. What resulted is detailed in this article . Moneygraph:
"... OPEC does not need to change its output deal since the group had already cut supply by much more than it had agreed. What Zanganeh offered was for OPEC and Russia to pump back up to decrease the current cuts to the initial 1.176 million barrels per day (bpd).
"Output in May 2018 was actually down by 1.9 million, somehow 62 percent or 724,000 bpd more than what was agreed upon in 2016."
The upshot is an increase will occur but no increase will occur--understand? The extraction amount agreed to in 2016 remains the amount OPEC will extract. There will be no increase in that amount this year.
Jun 26, 2018 | www.unz.com
Bardon Kaldian , June 25, 2018 at 7:05 pm GMT@utu
If Israel and Jewish Power killed JFK it matters very much. If by a magic wand I could make people believe that Israel and Jewish Power were behind JFK assassination it would be much easier to stop and undo all those things that you have listed:
This is simply wrong. Basically, it's the Joo (or any other) conspiracy, according to this world-view.
The crucial mistake virtually all conspiracy- theories minded people make is that they try to pin-point a clearly defined group (mostly religious, ethnic, racial,..) as the source of major socio-cultural changes, and frequently it's Jews (sometimes masons or something similar).
And this is a major misfire, because no such group exists. There is no causal connection between any ethnicity/race/ & great upheavals in the West (and in the US) in past 3-4 decades, especially re immigration debates, influx of culturally & racially foreign and inimical masses, disintegration of family & denigration of national loyalties etc. To think that a group (or groups), which is relatively easy to identify, can be the source of such monumental upheavals bespeaks of historical illiteracy.
There was no ethnic nor ideological group of people behind such shattering revolutions & world-view changes like transition from Roman republic to Imperial Rome, Protestant Reformation, Crusades, formation of national monarchies, Enlightenment, collapse of "divine rights" of kings, imperialist expansion of European powers, national awakening in the 19th C, WW1 and WW2, Not Jews, not masons, not Illuminati, not Rosicrucians, not some occult brotherhood residing in the Himalayas.
Simply, Western civilization has come to a dead end -as it was the continuity of the 18th C Enlightenment- and we are witnessing the processes of further decay, encapsulated in famous hypothetical question ascribed to Lenin: " Are the forces which propel us to greatness the same that will, transformed by mutations of History, eventually lead to our collapse ?"
A man who, despite his shortcomings & delusions about the role of technology, various national cultures and their dominant currents, understood this better than most was Oswald Spengler. The Western civilizational matrix is old and tired. And this is the root of the Western decline. That what plagues the West & the US the most (race replacement, PC "liberal" ideological muzzle, hedonist emptiness & biological collapse manifested in infertility, pathological altruism, lunatic ideological fashions like n-th wave of feminism, media aggression promoting "diversity" & homosexualism- as different from homosexuality, self-hatred of European & Western culture .)-this is as present, although a bit modified, in Italy, Spain, Denmark, Norway, France, Germany, Switzerland,.. as in the US. And in these countries Jewish presence in the media & the overall life is negligible or non-existent.
Although ruling elites differ in these countries, they are a mixture of hereditary aristocracy, established bourgeois families & plutocratic oligarchs. These groups have, historically, served their countries. Now, they are morally & culturally bankrupt and serve outmoded gods whose future is annihilation- similar situation that had befallen pompous & deluded aristocrats in the 18th-19th C or imperialist jingoists in the 20th.
The failure of nerve that comes with exhausted & geriatric social-cultural matrix is to blame, not some group conspiracy.
But, the societal-cultural matrix is exhausted, not the people. Our flaw is linear extrapolation of current events which leads to paralyzing pessimist fatalism. We should know from history this is a fatal mistake. Just compare Europe in 1930 (cars, planes, fascism, communism, cubism, quantum mechanics, relativity, psychoanalysis, radio, tanks, films, ..) and during 1900 (technologically, scientifically, ideologically and artistically more or less the same as 1880).
So, we should not give up hope, and some of us who are obsessed with Jews, should give up this tired old chestnut. If all of US Jewish ethno-nationalists were booted to Israel, life would be somewhat easier for Euro-Americans in some respects, but not essentially different. Blacks would remain blacks, PC muzzle would remain PC muzzle, dopeheads would remain dopeheads, Pentagon would remain Pentagon,
Jun 22, 2018 | www.theamericanconservative.com
Like a Dos Equis ad, Mexico is "keeping it interesante ." On July 1, Andres Manuel Lopez Obrador, the veteran left-wing politician known as AMLO, will likely win Mexico's presidential election , to the horror of policy analysts, U.S. government officials, and the Mexican business community. As head of the upstart National Regeneration Movement (MORENA, the Spanish acronym, also means "dark skin"), AMLO pledges to make Mexico self-sufficient on food, halt foreign investment in the oil industry, and grant amnesty to drug traffickers. AMLO hates the North American Free Trade Agreement (NAFTA) -- although he's promised to stay in it for now -- and "the Wall" even more.
Washington's days of having a predictable and compliant partner in Mexico may be over.
This election is likely to radically transform Mexican politics. MORENA is surging in the polls and may give AMLO a strong legislative bloc. Nationalist-minded legislators from other parties could also defect to his agenda. That would cause a major Mexican political realignment, under which for the next six years it could be governed by a self-described "revolutionary nationalist" ruling coalition. It makes sense: Mexico's neoliberal era had to end sooner or later. AMLO's longtime critique of an unfair economy and a complacent and unresponsive political system has finally resonated.
What accounts for this sudden turnaround? Several factors have aligned in AMLO's favor. Start with AMLO's opponents, who, in a time of change, represent continuity, splitting the neoliberal vote in Mexico's "winner-take-all" system. The conservative National Action Party (PAN), his strongest competitor, diluted its solid brand by running in coalition with two leftist parties. The ruling Institutional Revolutionary Party (PRI) selected a well-qualified former finance minister who is out of his depth as a campaigner. That's left the once-powerful PRI mailing this campaign in, and AMLO siphoning up its traditional voters.A Destitute Mexico: Is That What We Want? Why We Want Immigrants Who Add Value
Insecurity and corruption, according to polls , are the top issues for Mexican voters, and on these AMLO scores well. Especially on managing corruption and crime, Mexico's political elite have appeared notoriously inept. The former head of the state oil company PEMEX, a close ally of President Enrique Peña Nieto, has been credibly accused of taking up to $10 million in bribes to approve contracts from the corrupt Brazilian construction company Odebrecht. Several governors have been indicted for racketeering and graft; one even went on the lam and was arrested in Guatemala. Recently, Mexico's 12-year campaign to corral drug trafficking organizations fell apart, and violence skyrocketed. Twenty-eight thousand Mexicans were murdered last year, and political candidates are being physically attacked. Meanwhile, drug trafficking gangs ("cartels") are placing parts of the country off limits.
Then there's President Trump, who has treated Mexico as a problem and not as a partner by insisting that it fund his humiliating border wall. When asked in 2015 by Wall Street Journal editors if he thought the U.S. should promote stability and economic growth in Mexico, he replied, "I don't care about Mexico honestly. I really don't care about Mexico." Trump has bolstered AMLO's long-held view that Mexico has relied on the United States for too long. On the campaign trail, AMLO has vowed to put Trump "in his place."
Still, these more immediate causes don't entirely explain AMLO's impending success. At a deeper level, AMLO seems to be Mexico's answer to Samuel Huntington's key "who are we?" question on national identity. AMLO's MORENA explicitly seeks to revive the abandoned ideals of the Mexican Revolution (1910-1920): anti-imperialism, defense of national resources, equality, and the protection of peasant rights. Tellingly, AMLO cites as his heroes two successful presidents who propelled Mexico forward: Benito Juarez, the black-clad Zapotec Indian who defeated the French-backed 19th-century "empire," and Lazaro Cardenas, the former revolutionary general who nationalized the oil industry and built the modern Mexican state.
Despite his populism, AMLO hasn't always been an outsider. He started his political career during the 1980s, when the PRI was still was Mexico's governing party. But he soon saw the changes happening in his rural native state of Tabasco, when the oil boom pushed out the farming and fishing industry. AMLO dissented from the PRI's decision to liberalize the economy and joined the opposition in 1988.
Led by Carlos Salinas de Gortari, who was president from 1988 to 1994, the country embarked on a strict neoliberal development path and internationalist agenda, reversing its program of statist economics and authoritarian governance. Its ruling politicians sold state industries, embraced market reforms, let the peso float, and joined the North American Free Trade Agreement. Over the last several years, Mexico City has even permitted greater American involvement in its war against drug traffickers. Under Peña Nieto, Mexico finally allowed its oil industry to permit foreign investment.
In truth, these reforms worked well enough: Mexico democratized and developed into a solidly middle-income country with steady economic growth. Net immigration into the United States has come to a halt. Security issues were messy, but unlikely to destabilize the country.
These reforms represented a big win for Washington. If American intervention was needed for the occasional peso crisis or drug trafficker menace, we were happy to oblige. Mexico made a difficult partner at times, but on the policy side, it was where Washington wanted it to be.
But the cost of these changes may have been Mexico's identity, its sense of self. Returning to Huntington, his "The Clash of Civilizations?" article described Mexico as a state "torn" between its economic future and political and cultural past. After a top advisor to President Salinas described the sweeping changes the government was making, Huntington remarked, "It seems to me that basically you want to change Mexico from a Latin American country into a North American country." Salinas looked at him with surprise and exclaimed: "Exactly! That's precisely what we are trying to do, but of course we could never say so publicly."
AMLO and his followers have brooded about these radical changes for years. To this day, he refers to the arch-neoliberal Salinas simply as El Innombrable -- he that cannot be named. Neoliberalism launched AMLO not just on a political career but on a personal crusade to bring the country back to its former ideals.
When AMLO won the Mexico City mayorship in 2000, he built up a national political base and became a burr in the saddle of President Vicente Fox, who had embraced the liberal reforms of the formerly ruling PRI. AMLO criticized Fox relentlessly, and in retaliation, Fox attempted to have him legally prohibited from running for president in 2006.
This clumsy effort failed, giving AMLO a boost. But he narrowly lost the contest to the PAN's Felipe Calderon, whose campaign linked AMLO with Venezuela's leftist President Hugo Chavez. Embittered in defeat, AMLO immediately claimed the voting was rigged against him. AMLO and his raucous followers held protests for months and even formed a parallel government. He may have lost in 2006, but he solidified his position as the leader of Mexico's alternative left.
AMLO's anti-system stance has given weight to the claim that he'd be another Chavez. The comparison seems invidious, as the late comandante of Venezuela, an avowed Marxist and coup plotter, crushed democratic institutions, set up a socialist economy, and in general drove what had been a prosperous South American country into the ground. AMLO, an authentic democrat, appears less megalomaniacal and more rules-focused, more the romantic reactionary than the revolutionary radical.
Still, many of the same forces that propelled Chavez are driving AMLO now. Like Chavez, AMLO is coming to power after a period of neoliberal reform and perceived intractable corruption. Like Chavez, AMLO enjoys an almost mystical bond with his nation's poorer classes. And very much like Chavez, AMLO is instinctively, but probably not irreversibly, anti-American in outlook.
How these characteristics will play out with AMLO in power is hard to predict. The two main parties won't be behind him, but many of their followers might. All of those alienated by neoliberalism, the perceived kowtowing to Washington, the surrender of economic resources to foreign companies and the free market, will flock to his banner. It is remarkable how some former members of the right-of-center National Action Party and the PRI have backed his campaign.
Some of AMLO's policy proposals seem less the stuff of hard leftism than nostalgic nationalism. He focuses heavily on national development for industry and agriculture aimed at self-reliance and reducing imports. He proposes holding referendums on the enacted legislation, a move to broaden democracy, which would require constitutional reform. He seeks to raise the minimum wage, but refreshingly pledges "no new taxes."
AMLO loves to wax nostalgic about Mexico's strong state traditions and will almost certainly attempt to restore the waning power of the Mexican presidency as an anti-corruption pulpit. In the tradition of newly inaugurated Mexican presidents, he'll probably look to prosecute a node of corruption in Mexican society: a prominent businessman or politician, rather than a labor union like his predecessors.
Much of the progress the United States has made with Mexico on security cooperation will probably be jeopardized. It's hard to believe that AMLO will endorse the close relations that the DEA, the Pentagon, and the intelligence community have forged with their Mexican counterparts in the war on drugs. The extradition of the notorious drug kingpin Joaquin el Chapo Guzman to the U.S. in 2017 will probably be the high watermark in the relationship. It is doubtful that AMLO will permit more high-profile extraditions. President Trump's disdain for a close relationship that has taken us decades to build may come back to haunt us.
But a poor relationship between Washington and Mexico City doesn't have to be inevitable. Despite the rhetoric, the flamboyant American billionaire has much in common with the austere Mexican populist. Both countries have too many common interests to go down separate paths. The question is: does AMLO have to build the bomb to get Trump to care about Mexico?
Michael J. Ard is a former deputy national intelligence officer for the Western Hemisphere and the author of "An Eternal Struggle: The Role of the National Action Party in Mexico's Democratic Transition ." He teaches international relations at Rice University's Master of Global Affairs program.
Youknowho June 21, 2018 at 7:30 amAnother diplomatic triumph of TrumpCarlos , says: June 21, 2018 at 10:52 am
And just because they are similar do not expect that they might agree. Expect them to antagonize each other to play to their bases.That's just the thing, AMLO isn't "an authentic democrat." He founded MORENA so he could keep his presidential aspirations going; he's indistinguishable from the party. After losing in 2006, he notoriously said "to hell with institutions." His followers won't admit this, but his platform is as diluted as the rest: he's taken in suspects of corruption and has allied himself with both a very "conservative" party (the small, evangelical PES) and Mexico's hard leftists.Hibernian , says: June 21, 2018 at 9:20 pm"Washington's days of having a predictable and compliant partner in Mexico may be over."
What about Mexico's days of having a predictable and compliant partner in Washington?
Jun 15, 2018 | peakoilbarrel.com
George Kaplan , 06/15/2018 at 5:49 amMaybe the world economy will be so far in the tank by 2020 we'll be seeing general deflation amid low demand for fossil fuels.Kolbeinh , 06/15/2018 at 6:06 amThere sure seems to be a lot of factors pointing to a rather hard landing for this long business cycle (10 years is a really long boom period). The central banks have a tendency to print money when things go wrong; or use the low interest weapon if they have it. Where all this will end up is difficult to predict just because of how complex it is.Kolbeinh , 06/16/2018 at 11:21 amTo be more precise, after some reflection, what I fear is more stagflation. A rare historic incidence which combines inflation with negative economic growth. That is what happens when pouring money into an economy with scarce resources where oil is one of them. What is coming is typically not like 2008-09 just because black swans are everywhere, and higher inflation is the surprise coming forward in my opinion. Prices for fossil fuels will stay pretty high in such a scenario, e.g. with the decline rates for oil overall rising steadily. Which I think is a good thing due to the energy transition that has to happen. I think it is realistic that we can come up with a halfway of a solution for our energy problems and that it is good enough to secure a decent standard of living (or maybe halfway decent or okish ;-)) long into the future. But not an affluent one and it will be highly country specific. Unless some kind of technology breakthrough is coming, but that is certainly a long time project.DrTSkoul , 06/15/2018 at 10:00 amAt the same time, a lot of shipers are investing in two fuel engines (nat gas and fuel oil) to comply with sulfur rules
Jun 21, 2018 | peakoilbarrel.com
shallow sand x Ignored says: 06/18/2018 at 2:36 pmThere is a narrative that oil demand will soon begin dropping due to widespread use of EV.GoneFishing x Ignored says: 06/18/2018 at 3:28 pm
1 million EV just replaces 14,000 BOPD of demand. Conservatively assuming those one million EV require $40K per unit of CAPEX, just to replace 14,000 BOPD of demand took $40 billion of CAPEX.
Likewise, to replace 1.4 million BOPD of demand via EV would take $4 trillion of CAPEX.
Worldwide demand has been growing somewhere between 1.2-2.0 million BOPD annually, depending on who one believes.
See where I am going with this? How do the EV disruption proponents explain away the massive CAPEX required just to cause oil demand to flatten, let alone render it near obsolete?
I'd like to see some explanation with numbers.The average US car gets 25 mpg and travels 12,500 miles per year for 500 gallons of gasoline per year.Dennis Coyne x Ignored says: 06/18/2018 at 6:04 pm
Refineries in the US produce 20 gallons of gasoline per barrel of oil.
That gives 69,000 BOPD per day reduction per million EV cars in the US and 110,000 BOPD oil equivalent energy due to the multiple energies put into gasoline and distillate production.
At current rates of EV sales growth the US will reach 50 million EV cars by 2031. That should put he US to being mostly independent of external oil for gasoline by mid 2030's and
It's tough to predict a complete transition in the US since cars as a service could greatly reduce the numbers of cars needed, especially in dense population areas. That would mean a much earlier transition.
If US ICE cars trend upward in mpg during that time, the demand for oil could be quite low by the early 2030's.
All depends on continuation of trends, for which the auto manufacturers seem to be on board. Just have to get the public charging infrastructure out ahead of the trend.
Here is an interesting article, from a couple of years ago, showing the trend and sales at that time.
Cars get replaced all the time and the cost of new EVs will fall over time to the same price as ICEV, so it's simply a matter of replacing the ICEV currently sold with EVs over time, in addition cars can get better gas mileage (50 MPG in a Prius vs 35 MPG in a Toyota Corolla or 25 MPG in a Camry.) There's also plug in hybrids like the Honda Clarity (47 miles batttery range) or Prius Prime(25 mile range on battery) these have an ICE for when the battery is used up.
If oil prices rise in the short term to over $100/b (probably around 2022 to 2030), there will be demand for other types of transport besides a pure ICEV.
EVs and plugin hybrids will become cheaper as manufacturing is scaled up due to economies of scale.
Jun 21, 2018 | peakoilbarrel.com
Watcher, 06/17/2018 at 11:37 pm
Got time to go thru the bible more carefully.
Surprising stuff. Huge oil consumption growth rates in Eastern Europe. 8+% growth %s in Poland, Czech Republic and Slovakia. Something weird going on because Romania and Slovenia didn't show the same thing.
Western Africa grew consumption of oil 13% last year. I'll add a !!!!. East Africa about 6%. Both are over 600K bpd, so that growth rate is not on tiny burn.
World oil consumption growth 1.8%.
(population in africa . . . . . .)
Ktoś, 06/18/2018 at 8:44 amPoland's official oil consumption growth is caused by better fighting with illegal, and unregistered fuel imports since mid 2016. When taxes are 50% of fuel price, there is big incentive for illegal activities. Real oil consumption probably didn't increase much.Strummer, 06/18/2018 at 2:00 pmPoland, Czech and Slovakia are going through a huge economic boom now (I live in Slovakia and party in Czech Republic). It's visible everywhere, there wasn't this much spending and employment ever in the last 28 yearsWatcher, 06/19/2018 at 12:04 amSouth Africa grew at 0.6%.Watcher, 06/18/2018 at 2:43 pm
Middle Africa is listed as growing at 0.4%. North Africa is divided up Egypt, Morocco and "Other North Africa". Other was +4.7% consumption growth.
It's gotta be Nigeria west and Angola east.Pssssst.Dennis Coyne, 06/19/2018 at 6:41 am
Oil consumption 2017 increased 1.8% from 2016.
Oil price 2016 about $41/b. Oil price 2017 about $55/b.
hahahahhaaOil demand is mostly determined by GDP growth, oil price has a minor influence on short term demand. World GDP grew by about 5% from 2016 to 2017 according to the IMF, so oil demand increased by 1.8% possibly less than one would expect. Real GDP (at market exchange rates) grew by about 3% in 2017.
Jun 21, 2018 | peakoilbarrel.com
Dennis Coyne x Ignored says: 06/18/2018 at 5:54 pmHi George,Eulenspiegel x Ignored says: 06/19/2018 at 3:56 am
The idea behind peak demand is simply that oil supply may at some point become relatively abundant relative to demand in the future (date unknown). When and if that occurs, OPEC may become worried that their oil resources will never be used and will begin to fight for market share by increasing production and driving down the price of oil to try to spur demand. That is the theory, I think we are probably 20 to 40 years from reaching that point for conventional oil.
Oil still contributes quite a bit to carbon emissions and while I agree coal use needs to be reduced (as carbon emissions per unit of exergy is higher for coal than oil), I would think it may be possible to work on reducing both coal and oil use at the same time. Using electric rail combined with electric trucks, cars and busses could reduce quite a bit of carbon emissions from land transport, ships and air transport may be more difficult.Why making a fire sale?Dennis Coyne x Ignored says: 06/20/2018 at 8:00 am
It's better to sell half of your ressources for 90$ / barrel than all at 30$ / barrel.
The gulf states will always have cheap production costs at their side, they will earn more at each price of oil. Why not make big money, especially when at lower production speed the production costs are much lower (less expensive infrastructure).
And in the first case you can sell chemical feedstock for a few 100 years ongoing for a good coin. Theocracies and Kingdoms plan sometimes for a long time. When you bail out everything at sale prices, you end with nothing ( and even no profit).Eulenspeigel,
You assume half the resource can be sold at $90/b, at some point in the future oil supply may be greater than demand at a price of $90/b, so at $90/b no oil is sold and revenue is zero.
In a situation of over supply there will be competition for customers and the supply will fall to the point where supply and demand are matched. Under those conditions OPEC may decide to drive higher cost producers out of business and take market share, oil price will fall to the cost of the most expensive (marginal) barrel that satisfies World demand.
I don't think we are close to reaching this point, but perhaps by 2035 or 2040 alternative transport may have ramped to the point where World demand for oil falls below World Supply of oil at $90/b and the oil price will gradually drop to a level where supply and demand match.
Jun 21, 2018 | peakoilbarrel.com
Fernando Leanme , 06/19/2018 at 2:17 pmOlder wells are declining at about 8% per year. A 25 BOPD well with a 10 BOPD economic limit should have 70,000 barrels of oil left to produce in about 12 years.Dennis Coyne , 06/20/2018 at 7:53 amHi Fernando,Fernando Leanme , 06/20/2018 at 9:08 am
Is it safe to assume that newer wells will behave the same as older wells?
Some petroleum engineers that have commented at shaleprofile.com (Enno Peters wonderful resource) that the high level of extraction from newer wells will likely lead to a thinner tail.
Chart below from
illustrates this, notice how the 2014 and 2015 wells fall below the 2010 well profile after 24 months, the same is likely to occur for 2016 and later wells. Also note that the 2010 well profile is representative (close to the mean) for 2009 to 2012 average well profiles.
Dennis, i would say the decline rate (8%) is very safe to use for all LTO wells, i would definitely apply it after the 6th year of well life, because by then what counts is rock quality and fluid type. This is only good for a bulk projection.
By the way I tweaked my price model when I was preparing my CO2 pathway. I took into account the Venezuela crash, the difficulties the Canadians have moving their crude, etc. The price projection is $88 per barrel Brent for evaluating projects which start spending in 2019. I also prepared a different look for very long term projects which start spending in 2023: $110 per barrel.
Don't forget these aren't prices predicted for those particular years. They are prices one can use to evaluate long term projects such as exploring in the Kara Sea, offshore West Africa deep water, the African rifts, Venezuela heavy oil developments, etc. These prices are plugged in and escalated with inflation for the 20-30 year project period. Real prices should oscillate back and forth around these values.
Jun 21, 2018 | peakoilbarrel.com
Energy News, 06/19/2018 at 3:47 am 2018-06-19
Norwegian crude oil & condensate production (without NGLs) at 1,321 kb/day in May, down -223 m/m, down -297 from 2017 average or -18%. The main reasons that production in May was below forecast is maintenance work and technical problems on some fields.
Almost down to the Sept 2012 low at 1,310 kb/day
George Kaplan , 06/19/2018 at 4:01 amBig unplanned outages coming on the gas side for June numbers as well.Kolbeinh , 06/19/2018 at 4:26 amThis is what happens when there are no sizeable new fields coming online for 1/2 year and as G.Kaplan has mentioned not enough allocation for supply disruptions are included in the forecast.George Kaplan, 06/19/2018 at 4:39 am
A brutal decline, even if this month is an anomaly as NPD say.Looking at the field numbers (only through April) it looks like Troll Oil is in decline a bit earlier and a bit steeper than expected. It's the biggest oil producer still bu has dropped fairly consistently and slightly accelerating from 161 kbpd in October to 121 in April. It's all horizontal wells and requires continuous drilling to maintain production, it's cl