Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also
have considered the possibility that, just as Keynes’s ideas were tested to destruction in the
1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s
and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men
… are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.
Speculation and gambling were always a part of Wall Street but since the 1930’s
they were just a side-show, now they are the show.
“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”
-- John Kenneth Galbraith, The Great Crash of 1929
The term Casino Capitalism as a specific phase of
neoliberal transformation of capitalism.
Politically it was slow motion corporate coup d'état, which started in 70th and
is now accomplished in the USA and other Western countries which buries social-democratic (New Deal
style) model of capitalism. It hypertrophied police functions of state (in the form of
state) while completely avoiding economic sphere in ways other then enforcement of laws
(with a notable exclusion from this top 1% -- Masters of the Universe). In
this sense it is the opposite of communism (i.e. an entirely state-planned economy) and presupposed
a deregulated economy (in a sense of the "law of jungle" as a business environment) , but with
extremely strong militarized state, suppressing all the attempts to challenge the new "nomenklatura"
(much like was the case in the USSR). It is also called
economic liberalism or
“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political
liberalism has been a strategy to prevent social conflict. It is presented to poor and working
people as progressive compared to conservative or Right wing. Economic liberalism is different.
Conservative politicians who say they hate “liberals” — meaning the political type — have no real
problem with economic liberalism, including neoliberalism.
In other words this is a variant of neoliberal model of corporatism used in wealthy Western countries
during the period of "cheap hydrocarbons". The period that is probably near the end and which
by some estimate can last only another 50 years or so. The major crisis of casino capitalism
in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of
extracting return on capital, typical for casino capitalism), but also with the rise of the
price of oil and decrease of Energy returned on energy invested (EROEI). In this
sense the current low oil price period that started in late 2014 can be
viewed as the "last hurrah" of the casino
The term itself was coined by Susan
Strange who used it as a title of her book
Casino Capitalism published in 1986. She was one of the first who realized that
"The roots of the world's economic disorder are monetary and financial";
"The disorder has not come about by accident, but has in fact been nurtured and
encouraged by a series of government decisions." (p. 60). In other words its was a counter-revolution
of the part of ruling elite which lost its influence in 30th (dismantling New Deal from above
in the USA (Reaganomics) or
Thatcherism in the GB).
According to Susan Strange transformation of industrial capitalism into
neoliberal capitalism ("casino capitalism")
involved five trends. All of them increased the systemic instability of the system and
the level of political corruption:
Innovations in the way in which financial markets work due to introduction of computers;
The sheer size of markets; (with the introduction of 401K the size of stock market
Commercial banks turned into investment banks;
The emergence of Asian nations as large players;
The shift to self-regulation by banks (pp.9-10).
Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal
"casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter
this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the
same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism
with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor.
The same is true about globalization, especially about
globalization of financial flows, typical for casino capitalism.
this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the
US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism"
which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the
financial capitalism is unstable in the same sense as radioactive elements are unstable. And
this instability tend to increase with time. So there is probably natural half-life period for
neoliberalism as a social system. It might be already reached in 2008. In we assume that
global victory of neoliberalism happened in 1990. It is just 18 years. If we think that it
happened in late 60th, then it is closer to 50 years.
The global crisis
of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free
markets" lead to faster and more uniform economic development of all countries. While the peak of its
"ideological" power might be over (much like the peak of attractiveness of "command socialism" was
over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and
G7. And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain
the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy
rich and resource countries for western multinationals intact using color revolutions and
local wars. But as Napoleon quipped "You can do anything with
bayonets, you just can't sit on them".
Conversion to neoliberal capitalism was a reaction on stagnation of industrial production
and as such it was nurtured and encouraged by a series of government decisions for the last 50 years.
Stagnation of industrial production made expansion of financial sector of paramount importance for the
ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity
Futures Modernization Act of 2000 is pretty telling in this respect.
There were also at least two important parallel developments.
"Appetite comes with eating" and banks which initially rise as an alternative to usury
gradually became indistinguishable from them, the new usury (vampire squid as Matt
Taibbi called GS).
Financial institutions brass became dominant political force partially displacing (or more
correctly complementing) media-military-industrial
complex and oil-energy complex... Sen. Dick Durbin, on a local Chicago radio station
blurted out an obvious truth about Congress which, despite being quite obvious, is rarely
spoken "press scorps" :
“And the banks — hard to believe in a time when we’re facing a banking crisis that many
of the banks created — are still the most powerful lobby on Capitol Hill.And they frankly
own the place.”
In other words the US political system is a brand of corporatism with financial capital
standing on the top stop on interval to Washington, DC corporate hierarchy and holding the most
of political power.
There is more at work here than simply a ramped up version of social Darwinism with its savagely
cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii]
there is also a full scale attack on the social contract, the welfare state, economic equality, and
any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s
ode to selfishness and self-interest is of particular importance because it offers a glimpse of a
ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt,
and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It
destroys any viable notion of the and civic virtue in which the social contract and common good provide
the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic
responsibility. The idea of public service is viewed with disdain just as the work of individuals,
social groups, and institutions that benefit the citizenry at large are held in contempt.
As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific
effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive
lives, and money.”[iii]
But it does more by crushing any viable notion of the common good and public
life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions,
and values that constitute the public are now surrendered to powerful financial forces and viewed
simply as another market to be commodified, privatized and surrendered to the demands of capital.
With religious and market-driven zealots in charge, politics becomes an extension of war; greed and
self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted
in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the
work of Satan.
If the Republican candidacy race of 2012 is any indication, then political discourse in the United
States has not only moved to the right—it has been introducing totalitarian values and ideals into
the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work
in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing
income and wealth inequality, and the further merging of the financial and military spheres in ways
that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing
markets from social constraints, fueling competitiveness, destroying education systems, producing
atomized subjects, and loosening individuals from any sense of social responsibility prepare the
populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least
of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the
communities they inhabit.
Totalitarian temptations now saturate the media and larger culture in the language of austerity
as political and economic orthodoxy. What we are witnessing in the United States is the normalization
of a politics that exterminates not only the welfare state, and the truth, but all those others who
bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom
have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian
tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people
of color, and youth.
What too often goes unsaid, particularly with the media’s focus on inflammatory
rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans,
do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly,
it appears these political elite choose to act in ways that sustain their dominance through the systemic
reproduction of an iniquitous social order. In other words, big money and corporate power rule while
electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of
democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form
of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional
nature of our social order, while reinforcing a profound failure of political imagination. The issue
should no longer be how to work within the current electoral system, but how to dismantle it and
construct a new political landscape that is capable of making a claim on equity, justice, and democracy
for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from
The Obama administration has worked to extend the policies of the George W. Bush
administration by legitimating a range of foreign and domestic policies that have shredded civil
liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive
surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists
faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic
tendencies at work in the United States will be dangerously intensified.
Casino capitalism can probably be more properly called financial corporatism. While
the key idea of corporatism: that political actors are not individual people, but some associations
and first of all corporations (which are officially considered to be "persons" and have rights) and
trade unions, remains intact, financial corporatism is different from classic corporatism in several
Financial corporatism puts financial oligarchy at the top of pecking order. It is, like the USSR
Politburo, is allowed to operate essentially outside the law.
Instead of the charismatic leader, "free markets" are deified. People mobilization typical for
corporatism is no longer needed and passivity of individual (or, more correctly, limiting his
activities to consumption) is preferred (Inverted
Labor unions are considered undesirable political actors and organized labor is
blackmailed and prosecuted. While classic corporatism suppressed labor protests by forcing labor unions to asset brokered
by government settlements with capital owners, under casino capitalism labor unions are
considered undesirable political actors and organized labor is blackmailed and prosecuted. Only private corporations
are first class citizens. Atomization of employees by brainwashing people to view
themselves as individual sellers of their labor on job market (rigged by corporations) also make social protest more difficult and
allow capital to dictate condition of employment including shrinking of permanent employment
workforce in favor of contractors and part-timers that we observe in the USA.
The idea of social justice (which in classic corporatism was limited to the middle class of a
particular nation, anyway), was replaced (or more precisely, limited) it to the well-being of transnational,
mainly financial, elite (aka top 1%). Financial corporatism is not only hostile to labor unions,
it's hostile to the large part of the middle class as well.
Casino capitalism is international in nature
and ideologically close to Trotskyism (Trotskyism
for rich). While classic corporatism is national, financial corporatism is international by its nature
making it closer to Trotskyism (with the replacement of Communist Party as the vanguard on
world proletariat with financial oligarchy as a vanguard of transnational elite).
Like Trotskyism it is aggressive and use military force for propagating to any country which resist
it (similar to Trotskyism idea of Permanent revolution is implemented via
color revolutions which
serve for establishing in the country a neoliberal social order).
Promise of well-being is fake. Most of neoliberal ideology is based on lies and
distortions.So powerful propaganda
machine is required for constant brainwashing of population, promising them increase of
individual standards of living to the level that exists in the USA and G7. Which for most
countries can't be achieved.
Historically corporatism in various modifications
became dominant social system after WWII and defeated "command socialism" as was implemented in the
USSR. Here is an instructive review of corporatism history (The
Economic System of Corporatism):
In the last half of the 19th century people of the working class in Europe were beginning to show
interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly
the Catholic intelligentsia, decided to formulate an alternative to socialism which would
emphasize social justice without the radical solution of the abolition of private property.
The result was called Corporatism. The name had nothing to do with the notion of a business corporation
except that both words are derived from the Latin word for body, corpus.
The basic idea of corporatism is that the society and economy of a country should be organized
into major interest groups (sometimes called corporations) and representatives of those interest
groups settle any problems through negotiation and joint agreement. In contrast to a market
economy which operates through competition a corporate economic works through collective bargaining.
The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism.
He would gather the parties to some dispute and say, "Let us reason together."
Under corporatism the labor force and management in an industry belong to an industrial organization.
The representatives of labor and management settle wage issues through collective negotiation. While
this was the theory in practice the corporatist states were largely ruled according to the dictates
of the supreme leader.
One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich
in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin
dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith.
In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function
without direction or control by the state. The general culture heritage of Europe from the medieval
era was opposed to individual self-interest and the free operation of markets. Markets and private
property were acceptable only as long as social regulation took precedence over such sinful motivations
Coupled with the anti-market sentiments of the medieval culture there was the notion that
the rulers of the state had a vital role in promoting social justice.Thus corporatism was
formulated as a system that emphasized the positive role of the state in guaranteeing social justice
and suppressing the moral and social chaos of the population pursuing their own individual self-interests.
And above all else, as a political economic philosophy corporatism was flexible. It could
tolerate private enterprise within limits and justify major projects of the state. Corporatism
has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism,
but it is in fact a separate, distinctive political economic system.
Although rulers have probably operated according to the principles of corporatism from time immemorial
it was only in the early twentieth century that regimes began to identify themselves as corporatist.
The table below gives some of those explicitly corporatist regimes.
Corporatist Regimes of the Early Twentieth Century
Country, Religion, Monarchy
Miguel Primo de Rivera
Third Hellenic Civilization
In the above table several of the regimes were brutal, totalitarian dictatorships,
usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist.
In particular, the Roosevelt New Deal despite its many faults could not be described as fascist.
But definitely the New Deal was corporatist. The architect for the initial New Deal
program was General Hugh Johnson. Johnson had been the administrator of the military mobilization
program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good
job of managing the economy during that period and that is why he was given major responsibility
for formulating an economic program to deal with the severe problems of the Depression. But
between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National
Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.
It should be noted that many elements of the early New Deal were later declared unconstitutional
and abandoned, but some elements such as the National Labor Relations Act which promoted unionization
of the American labor force are still in effect. One part of the New Deal was the development
of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority
(TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make
TVA a model for the creation of regional political units which would replace state governments. Their
goal was not realized. The model for TVA was the river development schemes carried out in Spain in
the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son
of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.
Corporatist regime typically promote large governmental projects such as TVA on the basis
that they are too large to be funded by private enterprise. In Brazil the Vargas regime created
many public enterprises such as in iron and steel production which it felt were needed but private
enterprise declined to create. It also created an organized labor movement that came to control those
public enterprises and turned them into overstaffed, inefficient drains on the public budget.
Although the above locates the origin of corporatism in 19th century France it roots can be traced
much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development:
Twentieth Century Brazil, says,
Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval
social and legal structures, and into contemporary Catholic social philosophy. These
ideas are based on the premise that man's nature can only be fulfilled within a political
.......... The central core of the corporatist vision is thus not the individual but the political
community whose perfection allows the individual members to fulfill themselves and find happiness.
The state in the corporatist tradition is thus clearly interventionist and powerful.
Corporatism is collectivist; it is a different version of collectivism than socialism but it is
definitely collectivist. It places some importance on the fact that private property is not
nationalized, but the control through regulation is just as real. It is de facto nationalization
without being de jure nationalization.
Although Corporatism is not a familiar concept to the general public, most of the
economies of the world are corporatist in nature. The categories of socialist and pure market
economy are virtually empty. There are only corporatist economies of various flavors.
These flavors of corporatism include the social democratic regimes of Europe and the Americas,
but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The
Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as
was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are
now clearly corporatist in economic philosophy although not in name.
The term "Quiet
coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced
by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of
Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute
for International Economics. From March 2007 through the end of August 2008, he was Chief Economist
of the International Monetary Fund. The term was introduced in his article in Atlantic magazine,
published in May 2009(The
Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming,
says a former chief economist of the International Monetary Fund, is that the finance industry
has effectively captured our government
The wealth of financial sector gave it unprecedented opportunities of simply buying the political
power iether directly or indirectly (via revolving door mechanism):
Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent
of moments we have recently seen in emerging markets (and only in emerging markets): South Korea
(1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors,
afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly
stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll
over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers
into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry
up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled
out into the rest of the economy, causing a severe economic contraction and hardship for millions
But there’s a deeper and more disturbing similarity: elite business interests—financiers,
in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles,
with the implicit backing of the government, until the inevitable collapse. More alarming, they
are now using their influence to prevent precisely the sorts of reforms that are needed, and fast,
to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act
Top investment bankers and government officials like to lay the blame for the current crisis on
the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere
else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie
Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And,
of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness”
were fast asleep at the wheel.
But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American
economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally
associated with Democrats and some with Republicans, they all benefited the financial sector.
Policy changes that might have forestalled the crisis but would have limited the financial sector’s
profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity
Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years
or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and
it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.
Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy
in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading
much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps
greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly
wealthy population invested more and more money in securities, helped by the invention of the IRA
and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector
never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19
percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been
in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948
to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of
the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent
The great wealth that the financial sector created and concentrated gave bankers enormous
political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In
that period, the banking panic of 1907 could be stopped only by coordination among private-sector
bankers: no government entity was able to offer an effective response. But that first age of banking
oligarchs came to an end with the passage of significant banking regulation in response to the Great
Depression; the reemergence of an American financial oligarchy is quite recent.
The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate
crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have
today draw much of their power from being too big to fail. Nationalization and re-privatization
would not change that; while the replacement of the bank executives who got us into this crisis would
be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would
change only the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business.
Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole,
but with the requirement of being broken up within a short time. Banks that remain in private hands
should also be subject to size limitations.
This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual
institutions in a sector that is essential to the economy as a whole. Of course, some people
will complain about the "efficiency costs" of a more fragmented banking system, and these costs are
real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes.
Anything that is too big to fail is too big to exist.
To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths,
we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat
industrial monopolies were not designed to address the problem we now face. The problem in the financial
sector today is not that a given firm might have enough market share to influence prices; it is that
one firm or a small set of interconnected firms, by failing, can bring down the economy. The
Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s
Caps on executive compensation, while redolent of populism, might help restore the political
balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to
the people who work there and to the government officials who were only too happy to bask in its
reflected glory—has been the astounding amount of money that could be made. Limiting that money would
reduce the allure of the financial sector and make it more like any other industry.
Still, outright pay caps are clumsy, especially in the long run. And most money is now made in
largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated.
Regulation and taxation should be part of the solution. Over time, though, the largest part
may involve more transparency and competition, which would bring financial-industry fees down. To
those who say this would drive financial activities to other countries, we can now safely say: fine.
To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important
thing is to change them from time to time. If the U.S. were just another country, coming to the IMF
with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises
that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong
recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.
Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When
they get into trouble, they quite literally run out of money—or at least out of foreign currency,
without which they cannot survive. They must make difficult decisions; ultimately, aggressive
action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich
beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own
currency, which it can print. As a result, it could very well stumble along for years—as Japan did
during its lost decade—never summoning the courage to do what it needs to do, and never really recovering.
A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a
sure thing right now. Certainly no one at the IMF can force it.
In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank
deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup
and AIG. The administration will try to muddle through, and confusion will reign.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against
oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and
chaos were very much in the interests of the powerful—letting them take things, legally and illegally,
with impunity. When inflation is high, who can say what a piece of property is really worth? When
the credit system is supported by byzantine government arrangements and backroom deals, how do you
know that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and
we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t
seem to get into gear.
The second scenario begins more bleakly, and might end that way too. But it does provide at least
some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues
to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s
banks are mostly owned by western European banks—justifiable fears of government insolvency spread
throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies
that export manufactured goods are devastated, and the commodity producers in Latin America and Africa
are not much better off. A dramatic worsening of the global environment forces the U.S. economy,
already staggering, down onto both knees. The baseline growth rates used in the administration’s
current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S.
Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds
may become more concentrated.
The conventional wisdom among the elite is still that the current slump "cannot be as bad as the
Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because
the world is now so much more interconnected and because the banking sector is now so big. We face
a synchronized downturn in almost all countries, a weakening of confidence among individuals and
firms, and major problems for government finances. If our leadership wakes up to the potential consequences,
we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope
it is not then too late.
It is pretty interesting to see how financial oligarchy filters information provided to the population
to fit their biases. For example, the key facts about repeal of Glass-Steagall law (BTW Joe
Biden voted for it) mostly hidden from the public:
Glass-Steagall had been weakened under Reagan, under the recommendation of Alan Greenspan who
was essentially a Wall Street mole in Fed (see below the concept introduced by
Willem Buiter of ‘cognitive regulatory
capture’ of the Fed by Wall Street.)
Clinton administration and Congress supported the repeal but it was Phil Gramm who made it happened.
Not only he was the main cheerleader for the repeal. Gramm essentially wrote the bill. As NYT noted:
The measure, which Mr. Gramm helped write and move through the Senate, also split up oversight
of conglomerates among government agencies. The Securities and Exchange Commission, for example,
would oversee the brokerage arm of a company. Bank regulators would supervise its banking operation.
State insurance commissioners would examine the insurance business. But no single agency would
have authority over the entire company.
"There was no attention given to how these regulators would interact with one another," said
Professor Cox of Duke. "Nobody was looking at the holes of the regulatory structure."
The arrangement was a compromise required to get the law adopted. When the law was signed in
November 1999, he proudly declared it "a deregulatory bill," and added, "We have learned government
is not the answer."
Support was bipartisan which tells something about Clinton Congress:
Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In
December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous
consent after Senator Gramm dominated the Senate debate...
"He was the architect, advocate and the most knowledgeable person in Congress on these topics,"
Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial
"The virtually unregulated over-the-counter market in credit-default swaps has played a significant
role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.,"
Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.
But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for
a change) initiatives in Heritage Foundation and other right-wing think tanks publications.
So what we are experiencing is a the completion of the transformation of one phase of capitalism
to another. It happened in stages:
Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from
re-built Europe and Asian markets severely stressed the US manufacturing. due to competition
return of capital dropped and in several industries became negative.
Computers brought innovations into financial markets. They make possible real time trading
of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast
trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent
by financial institutions from the society.
Globalization kicked in due to new opportunities offered by high speed global communications
(Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the
financial markets increased to the extent that they started to represent a different, new transnational
phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian
elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth
column) West went to significant length to protect them and their racket (Mikhail
Khodorkovsky - Wikipedia,)
Commercial banks turned into investment banks to exploit this opportunity.
Financial sector completely corrupted academic science converting most economists to pay prostitutes
which serve their interests.
Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once
in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge
industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization
of xUSSR space). Harvard Mafia (with some
support from London) did the bidding of western banks in xUSSR space. As more becomes known about
the laundering of Russian money in Western banks, many in the United States will likely try to hide
behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that
country's sorry conditions--with the Harvard Institute for International Development's Russia project
(HIID) playing a major role (Harvard's
'Best and Brightest' Aided Russia's Economic Ruin ). Professor
Jeffery Sacks provided
a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all
xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality,
prostitution, child poverty, and prominent role of organized crime.
Banks became dominant political force on western societies with no real counterbalance from
other parts of the elite. The first president completely subservient to banking elite was elected
in the USA in 1992. Bill Clinton regime lasted eight years and along with
economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial
regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying
force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they
abolished the US pension system as it impede playing with population money and replaced in with widely
inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities
became just a den of bond traders looking for then next mark which give them the ability to put municipalities
deeper in debt.
Newly acquired political power of financial elite speeded the shift to bank "self-regulation"
created huge shadow banking system which dwarf "official" under the smoke screen of "free-market"
propaganda and PR from a coterie of corrupts academics (Chicago
Scholl, Harvard Mafia, etc) . It engaged
in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large
displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly
acquired power financial elite remove all regulations that hamper their interests.
Glass-Steagall was repealed at the last
days of Clinton presidency, financial derivatives became unregulated.
Deindustrialization kicked in. As financial speculation proved to be much more profitable
to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing
which first was limited to manufacturing jobs now extent its reach on IT and decimate previously
profitable sector and its export potential.
Externalities can no longer be suppressed and economics became unstable. Growth of inequality,
job insecurity, as well as frequency of financial crises were natural consequences of financialization
of the economy. They create huge imbalances, like bubble in residential real estate which was blown
with the help and full support of the USA government as a way to overcome dot-com crisis consequences.
Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis
of enormous proportions. By their reckless policies and greed financial sector caused huge financial
crisis of 2008 and now they are forcing national governments to auction off their cultural heritage
to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest
banks, the most corrupt institutions the world has ever known.
Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption
in western economies came under threat. Debt expansion which led to overconsumption within the western
economies affected (or infected) by financialization. To sustain the current standard of living financial
expansion became the necessity. It took the form of a competition for spheres of influence in the
area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central
banks play critical role in financing wars. After all Banks of England was created with this exact
I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA
economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more
correctly the US brand of corporatism) was by-and-large complete.
In short we are living in a new politico-economic system in which financial capital won victory over
both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling
class and this fact is difficult to dispute. As a result. instead of the robber barons of the early
20th century (some of whom actually created/consolidated new industries), we have the top executives
from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old
They are living off parasitic monopolization of access to any (physical, financial, intellectual,
etc.) kind of property and gaining significant amount of profit without contribution to society (see
Rentier capitalism which
is a very fuzzy term for neoliberal model of capitalism).
Stagnation of industrial manufacturing droved up financial speculation as the method to compensate
for falling rate on return on capital. This stagnation became prominent during Reagan administration
(which started the major shift toward neoliberalism), although signs of it were present from early 60th.
For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing
jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries
(66K people) were working in executive and managerial positions. Another 17% are in marketing, sales
and processional specialty occupations (computer system analysts, PR specialists, writer and editors).
Those changes in the structure of employment had several consequences:
The stagnation of the underlying economy meant that capitalists were increasingly dependent
on the growth of finance to preserve and enlarge their money capital.
The financial superstructure of the capitalist economy could not expand independently of its
base -- underlying productive economy — hence the bursting of speculative bubbles became a recurrent
and growing problem.
Financialization could never overcome stagnation of industrial production. It is just
an opium for rich, not a structural adjustment of the stagnation-prone economy. But like addition
to narcotics does to human body it does tremendous damage to real economy.
Rapid increase in inequality is necessary to sustain the appetites of the elite in the system
with fixed size of the pie. Politico-economic conditions might became even more unfavorable for
labor. Stagnation of industrial production mean shrinking pie, which necessitates redistribution
of wealth in favor of a new, all-powerful financial Rentier class. This redistribution resulted in
partial wipe-out of large swats of middle class. For the past three decades, America has steadily
converted itself into a nation of haves (as Bush II quipped "This is an impressive crowd -- the haves
and the have mores! Some people call you the elite -- I call you my base". ) and have-nots. The cost
of a college education rises rapidly at a time when wages for skilled labor stagnate, so access to
college became against discriminated in favor of upper class of the society. Repressive apparatus
and ideological brainwashing are too strong to mount effective resistance.
The key to understanding of Casino Capitalism is that it was a series of government decisions (or
rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism
has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the
face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate,
by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency
which it had vis-à-vis its main economic rivals and grab as large part of the world economic
pie as it can. And this power grab was supported first of all by the role of dollar as currency in which
oil is traded.
There might be some geo-strategically motives as well as the US elite in late 80th perceived that
competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse
Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege)
until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse
of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization
of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in
Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions.
The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin"
now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US
government we mean US banks".
According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor
to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to
solicit maximum contributions from employees and families. They might have been brought down to earth
this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan
Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America,
$2.1 million. Some think the long-term effect of such contributions to individual candidates was clear
in the roll-call votes for the bailout.
Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to
CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted
against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill
got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average
of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was
passed four days later, 263 to 171.
According to the article
Fire Sale (The American
Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are FIREmen.
The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic
committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look
at Senator Dodd's top donors for 2007-8 on openSecrets.org
) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep.
Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking
truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed
mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage
At the same time rise of financial capital dramatically increased instability. An oversized financial
sector produces instability due to multiple positive feedback loops. In this sense we can talk about
Financial Sector Induced
Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension
of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural
consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation
of the oversized financial sector negative influence of the economy. And in 2008 it did brought out
economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless
gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression.
Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality,
the financial elite much like Bolsheviks elite, is having its own interests above the interests of the
As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism,
and other inhibitions sometimes dumb down national debate". And the same statement is true for financial
elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society
became one giant Enron as money that are made from value addition in the form of manufacturing fade
in significance to the volume of the money that is made from shuffling money around. In other was the
Wall Street's locked USA in the situation from which there is no easy exit.
Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating
creation of various debt instruments, interest of which at some point overwhelm the system carrying
capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there
is no good collateral against which lending freely was possible, even at high rates.This
means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other
words Ponzi economy of "saving and loans" is replaced with Madoff economy.
Whether you shift the resulting huge private debt to public to increase confidence or not, the net
result is of this development of events is a crisis and a huge debt that society needs to take. Actually
the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns
and Lehman was only a start of consolidation of finances and we need to find something that replace
financial sector dominance in the national economy. It would be nice is some technological breakthrough
happened which would lift the country out of this deep hole.
Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious
doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of
Neoliberalism. The latter as an ideology
and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable
autocratic government which serves as channel of a wealth transfer from the public to a rentier elite.
In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.
Addiction of the societies to disastrous politico-economical doctrines are similar to addictions
to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a
lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this
case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better
off adopting ideology of neoliberal capitalism; so it was revolution from above. this abrupt
switch created chaos in economics (which was applauded by Washington which under Clinton
administration adopted the stance the Carnage needs to be destroyed and
facilitated the process), criminal privatization
of major industries, and pushed into object poverty the 99% of population of those countries. For
some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal
This also means that "society at large" did not had effective brakes to the assent of financial plutocracy
(aka financial oligarchy). I would add to this the computer revolution
and internet that made many financial transaction qualitatively different and often dramatically cheaper
that in previous history. Computers also enabled creation of new financial players like mutual funds
(which created a shadow banking system with their bond funds) , hedge funds,
exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.
From the historical view Reaganomics also can be considered to be the US flavor of
Lysenkoismwith economics instead of genetics as a target.
Here is how Reaganomics is defined
reduce marginal tax rates on income from labor and capital,
reduce government regulation of the economy,
control the money supply to reduce inflation.
In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure
from his immediate predecessors.
Reagan became president during a period of high
unemployment (commonly referred
to as stagflation), which
had largely abated by the time he left office.
Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke
screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to
one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal
dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded
the role of state and government spending. The number two was applied by-and-large to top 1%. The number
three means deregulation in the interests of financial oligarchy and dismantling all social program
that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam,
in the same sense as number one. As soon as financial institutions get in trouble, money are printed
as if there is no tomorrow.
While the essence of Reagonomics was financial deregulation, the other important element was restoring
the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms.
In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to
reverse the New Deal restrictions on financial sector and restore its dominance in the society.
Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very
small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan
administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority"
as an important part of republican political base, which can be attracted to detrimental to its economic
position policies by the smoke screen of false "moral" promises).
It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished
record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism
opponents were purged and economic departments of the country were captured by principless careerists
ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special
breed of careerists rotated from Republican Party into Fed and other government structures. A classic
example of compulsive careerists that were used by finance sector to promote its interests was Alan
One of the key ideas of Reaganomics was the rejection of the sound approach that there should be
a balance between too much government regulation and too little and that government role is important
for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists
and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare
to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS,
Citi, AIG, are quite natural consequence of Reaganomics.
Reaganomics was a the US flavor of Lysenkoism with economics
instead of generics as a target... It can and should be called Economic Lysenkoism.
The most interesting part of Reaganomics was that the power of this ideology made it possible to
conditioned "working class" and middle class to act against their own economic interests. It helped
to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed
to achieve with working class of the USSR, but with much more resentment. This makes it in many ways
very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way:
"history repeats, first as a tragedy, then as farce).
Along with the term Reaganimics which implicitly stresses the deregulation, the other close term
"market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview
Market Fundamentalism is the exaggerated faith that when markets are left to operate on their
own, they can solve all economic and social problems. Market Fundamentalism has dominated
public policy debates in the United States since the 1980's, serving to justify huge Federal tax
cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the
government’s civilian programs.
Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any
pseudo-scientific theory with the term Lysenkoism. This holds true for both
Market Fundamentalism (after all
Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and
hired guns from academia just do what powers that be expected) and, especially,
side economic. The political genius of those ideas is evident. Supply-side economics transformed
Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower
deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not
like a free lunch?
In this sense the Republican Party played the role very similar to the Communist Party of the USSR.
For example supply side economics was too bizarre and would never survive without explicit government
support. This notion is supported by many influential observers. For example, in the following
comment for Krugman article (Was
the Great Depression a monetary phenomenon):
Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a
political construct than based on sound economic theory. However, it would take a while before
its toxic legacy is purged from the economics departments. Indeed, in some universities this
might never happen.
Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent
a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case
of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases
the societies were economically and ideologically bankrupt at the end.
Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy
— and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of
the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of
the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR
was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to
critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population
were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants
in industrialized countries. From this point of view this category of "state slaves" is generally more
numerous that gulag inmates. Prison population also can be counted along those lines.
It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its
dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant
privilege" of dollar status as the global fiat currency.
Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance,
and real estate) and diminished role of other and first of all manufacturing industries. It was also
accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph
of the trader in assets over the long-term producer" in
The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second
life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it
New Deal regulations were systematically destroyed. Dumped down variants of
like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative"
entrepreneur as a new Übermensch,
which stands above morality.
"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good'
men, Christians, and other nihilists ... When I whispered into the ears of some people that they
were better off looking for a
Cesare Borgia than a
Parsifal, they did not believe
Safranski argues that the combination of ruthless
warrior pride and artistic brilliance
that defined the Italian
Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche
intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of
the modern Western middle class and its pseudo-Christian egalitarian value system.
The instability and volatility of active markets can devalue the economic base of real lives, or
in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting
and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge
manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty
objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse
and relying on the most ignorant part of the population as the political base (pretty much reminiscent
of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks
While transformation to casino capitalism was an objective development, there were specific individuals
who were instrumental in killing New Deal regulations. We would single out the following twelve figures:
(although first steps toward casino capitalism were made under Carter).
There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were
rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous
consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be
called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to
prosecute at least some of them.
In Bailout Nation (Chapter 19) Barry
Ritholtz tried to rank major players that led country into the current abyss:
1. Federal Reserve Chairman
2. The Federal Reserve
(in its role of setting monetary policy)
3. Senator Phil
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and
Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley,
and Goldman Sachs) and their CEOs
18. President George
19. President Bill
20. President Ronald
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries
Robert Rubin and
25. FOMC Chief Ben
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation
of debt. He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge
Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism
of increasing fragility:
Hedge finance: income flows are expected to meet financial obligations in every period.
The "hedge borrower" is one who borrows with the intent of making debt payments from cash flows from
Speculative finance: the firm must roll over debt because income flows are expected to
only cover interest costs. the "speculative borrower" who borrows based on the belief that the appreciation
of the value of the assets (e.g. real estate) to refinance or pay-off their debt but who does not
have sufficient resources to repay the original loan, otherwise;
A Minsky moment is the point in a
credit cycle or
business cycle when
investors have cash flow problems due to spiraling debt they have incurred in order to finance
speculative investments. At this point, a major selloff begins due to the fact that no
counterparty can be found
to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse
in market clearing
asset prices and a sharp drop in
Ponzi finance: income flows won’t even cover interest cost, so the firm must borrow more
or sell off assets simply to service its debt. The "Ponzi borrower" (named for
Charles Ponzi, see also
Ponzi scheme) is who relies
on continually rolling over the principal obtained from new participants in the Ponzi scheme to cover
interests. After a certain point, the private sector debt can only be perceived as sustainable as
long as asset prices are perceived to be in continuous growth. Since the rise of asset prices is
fueled by rising indebtness, from a certain point onwards, the process acquires a pure speculative
character. When the rise in asset prices is interrupted, the private sector discovers it is insolvent.
The choice become either a horrible end or an endless horror.
After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper
power (American exceptionalism)
and "end of history" where capitalism was supposed to reign supreme followed. But in 2000 the first
moment to pay the piper arrives. It was postponed by Iraq war and housing bubble but reappeared in much
more menacing form in 2008. It looks like in 2009 the USA arrived to the a classic Minsky moment with
high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which
threaten the very survival of our system and way of life.
The shift from speculative toward Ponzi finance was speed up by increased corruption of major players.
"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained,
it encourages greater speculation and risk taking in borrowing and lending. Financial innovation
makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the
basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods
naturally lead to optimism, to booms, and to increasing fragility.
A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation,
once started, is very difficult to stop. It may not end until balance sheets are largely purged of
bad debts, at great loss in financial wealth to the creditors as well as the economy at large."
For Strange the speed at which computerized financial markets work combined with new much larger
size and their now, near-universal pervasiveness is an important qualitative change. One of the side
effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are
invested daily as foreign transactions. It is estimated that 98 per cent of these transactions are speculative.
In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.
Susan Strange (June 9, 1923 - October 25, 1998) was a
British academic who was
influential in the field of
political economy. Her most important publications include Casino Capitalism, Mad Money,
States and Markets and The retreat of the State: The Diffusion of Power in the World Economy.
It was predominantly as a creative scholar and a forceful personality that she exercised her influence.
She was almost single-handedly responsible for creating ‘international political economy’ and turning
it into one of the two or three central fields within international studies in Britain, and she defended
her creation with such robustness, and made such strong claims on its behalf, that her influence
was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest
and most influential campaigners for the closer integration of the study of international politics
and international economics in the English language scholarship.
In the later period of her career, alongside the financial analyses offered in Casino Capitalism
(the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad
Money, Strange's contributions to the field include her characterisation of the four different
areas (production, security, finance and knowledge) through which power might be exercised in International
Relations. This understanding of what she termed "structural power", formed the basis of her argument
against the theory of
American Hegemonic Decline in the early eighties.
Her analysis particularly in States and Markets focused on what she called the ‘market-authority
nexus’, the see-saw of power between the market and political authority. The overall argument of
her work suggested that the global market had gained significant power relative to states since the
1970s. This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was
emerging between territorially-bound nation states and weak or partial intergovernmental cooperation
in which markets had a free hand which could be constructive or destructive.
Among early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea
that the major economic function of Governments is to strengthen countervailing powers to achieve
some kind of balance between capital and labor. While unions are far from being perfect and
his prediction did not materialize in view of sliding to corporatism it may well be that the renewed
support of unions right efforts to organize could make a big contribution to a revised, post subprime/derivatives/shadow_banking
crisis stageof capitalism.
His critique of Milton Freedman pseudoscience still has its value today.
As Joseph Stiglitz noted (CSMonitor,
Dec 28, 2006):
...In many ways, Galbraith was a more critical observer of economic reality.
Driven to understand market realities
Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely
needed reminder that all is not quite as perfect as the perfect market models – with their perfect
competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's
Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as
it was, with all the problems of unemployment and market power that simplistic models of competitive
markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally
... ... ...
In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929
– including the role of the stock market's speculative greed fed by (what would today be called)
irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused
on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.
What Galbraith understood, and what later researchers (including this author) have proved, is
that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides
capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered
markets often produce too much of some things, such as pollution, and too little of other things,
such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect –
that is, always – markets are inefficient; hence the need for government action.
Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing
powers. He had the misfortune of articulating these ideas before the mathematical models of game
theory were sufficiently developed to give them expression. The good news is that today, more attention
is being devoted to developing models of these bargaining relationships, and to complex, dynamic
models of economic fluctuations in which speculation may play a central role.
While Friedman never really appreciated the limitations of the market, he was a forceful critic
of government. Yet history shows that in every successful country, the government had played an important
role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure.
Galbraith made this case better than most.
Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending
with advertising, political persuasion, and social pressures. It was because of his close touch with
reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson
Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as
it is theorized in simplistic models – has enhanced our understanding of the market economy.
He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual
life: Who will stand up against the economics establishment to articulate an economic vision that
is both in touch with reality and comprehensible to ordinary citizens?
Galbraith was vindicated in his belief that the only economics possible is political economics and
as government is always an agent of dominant class it always mixed with politics. Krugman and Stiglitz
both have eaten humble pie, because according to neoclassical economics the crises should not have happened.
Both should now reread Galbraith's
The Great Crash: 1929 (see also
BTW it is interesting that in 1996 Paul Krugman criticized limitations of Galbright vision in the following
To be both a liberal and a good economist you must have a certain sense of the tragic--that is,
you must understand that not all goals can be attained, that life is a matter of painful tradeoffs.
You must want to help the poor, but understand that welfare can encourage dependency. You must want
to protect those who lose their jobs, but admit that generous unemployment benefits can raise the
long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but
accept that too high a rate of taxation can discourage investment and innovation.
To the free-market conservative, these are all arguments for government to do nothing, to accept
whatever level of poverty and insecurity the market happens to produce. A serious liberal does not
reply to such conservatives by denying that there are any trade-offs at all; he insists, rather,
that some trade-offs are worth making, that helping the poor and protecting the unlucky may have
costs but will ultimately make for a better society.
The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who
is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation
of the complexity of the human condition than a mere technical economist would -- lacks this tragic
sense. Galbraith's vision of the economy is one without shadows, in which what is good for social
justice always turns out to have no unfavorable side effects. If this vision is typical of liberal
intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness
to face up to uncomfortable reality.
Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to
Economist's View blog) :
Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private
opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels
by extravagant private car to picnic by a polluted river.
Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention
to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism:
a reluctance to acknowledge that resources are scarce. In Galbraith’s scheme, said Herbert
Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked
whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but
they were not the right questions.”
This idea of "casino capitalism" as a driver of financial instability was developed further in the
The Crisis of Global Capitalism by George Soros (1998), who highlights the potential for disequilibrium
in the financial system, and the inability of non-market sectors to regulate markets.
Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated
with such candor and accuracy that the book made a significant impact. The following is a sampling of
Unregulated financial markets are inherently unstable. Soros observes that, contrary to
conventional economic theory, financial markets are not driven toward a relatively stable and rational
price by the objective value assessment of such things as the soundness of a company's management,
products, or record of profitability. Rather they are constantly driven away from equilibrium by the momentum of self-fulfilling expectations -- a rising stock price
attracts buyers who further raise the price-to the point of collapse. The recent massive inflation
and subsequent collapse in the price of the shares of unprofitable dot-com companies illustrates
Bank lending also contributes to the instability, because the price of real and financial assets
is set in part by their collateral value. The higher their market price rises the larger the loans
banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value
of the assets plummets below the amount of the money borrowed against them. This forces banks
to call their loans and cut back on the lending, which depresses asset prices and dries up the
money supply. The economy then tanks-until credit worthiness is restored and a new boom phase
Financial markets are amoral by definition. Following Napoleon Bonaparte, Soros stressed
that there is no meaningful place for individual moral behavior in the context of financial markets,
because such behavior has no consequence other than to reduce the financial return to the ethical
When I bought shares in Lockheed and Northrop after the managements were indicted for bribery,
I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England
was on the other side of my transactions, and I was in effect taking money out of the pockets
of British taxpayers. But if I had tried to take social consequences into account, it would have
thrown off my risk-reward calculation, and my profits would have been reduced.
Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and
Britain would have devalued sterling no matter what he did. "Bringing my social conscience into
the decision-making process would make no difference in the real world; but it may adversely affect
my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral,
but his basic argument is accurate. His understanding that it is futile to look to individual morality
as the solution to the excesses of financial markets is all too accurate.
Corporate employees are duty-bound to serve only corporate financial interests. Soros
Publicly owned companies are single-purpose organizations-their purpose is to make money. The
tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned
and upright citizens, but their room for maneuver is strictly circumscribed by the position they
occupy. They are duty-bound to uphold the interests of the company. If they think that cigarettes
are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they
ought to quit their jobs. Their place will be taken by people who are willing to carry on.
Though not specifically mentioned by Soros, this is why corporations were in the past (at least
partially) excluded from the political processes (although it was never complete and it is well known
fact that Crusades and
Siege of Constantinople
(1204) were financed by Genoese
bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the
society can define their goals and the rules of the marketplace. They are incapable of distinguishing
between private corporate interests and broader public interests. But that changed with the global
dominance of corporatism.
Financial markets are oblivious to externalities and are infected by "short-termism". Specifically
the fact that a strategy or policy produces economic returns in the short-term does not mean the
long-term results will be beneficial. The focus of financial markets is on short-term individual
gain to the exclusion of both social and longer-term consequences. The fact that particular policies
and strategies are effective in producing short-term financial returns does not mean they are more
generally beneficial or desirable. Soros offers the example that running up a budget or trade deficit
"feels good while it lasts, but there can be hell to pay later."
The relationship between the center and the periphery of the capitalist system is profoundly
unequal. The powerful countries at the center of the capitalist system are both wealthier and
more stable than countries at the periphery because control of the financial system and ownership
of productive assets allows them to shape economic and political affairs to their benefit.
"Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the
development of democratic institutions. The international flow of capital is subject to catastrophic
In times of uncertainty financial capital tends to return to its country of origin, thus depriving
countries at the periphery of the financial liquidity necessary to the function of monetized economies.
"The center's most important feature is that it controls its own economic policies and holds in its
hands the economic destinies of periphery countries."
In the capitalist system greed (aka "monetary values") tend to displace social values in sectors
where this is destructive of important public interests. Soros writes:
Monetary values have usurped the role of intrinsic values, and markets have come to dominate
spheres of existence where they do not properly belong. Law and medicine, politics, education,
science, the arts, even personal relations-achievements or qualities that ought to be valued for
their own sake are converted into monetary terms; they are judged by the money they fetch rather
than their intrinsic value."
Because financial "capital is free to go where most rewarded, countries vie to attract and retain
capital, and if they are to succeed they must give precedence to the requirements of international
capital over other social objectives.
One notable later researcher of casino capitalism, especially "free market" fundamentalism propaganda
Cambridge University researcher Ha-Joon Chang. In 2011 he published a fascinating book
23 Things They Don't Tell You About Capitalism. Here are two Amazon reviews that shed some light
at the key ideas of the book:
Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has
written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans.
Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.
Chang takes on the free-marketers' dogmas and proposes ideas like
there is no such thing as a free market;
the washing machine has changed the world more than the internet has--[ I respectfully
we do not live in a post-industrial age;
globalization isn't making the world richer;
governments can pick winners;
some rules are good for business;
US (and British) CEOs are overpaid;
more education does not make a country richer;
and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg,
Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes
per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland,
Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the
highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and
pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more
frequent crises. Britain's growth rate in income per person per year was 2.4 per cent
in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s
and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per
cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009,
and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world
economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'.
Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment
as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the
world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s,
and that Britain was one of world's the most protectionist countries during its rise, from the
1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than
any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead,
we need controls capital, on mergers and acquisitions, and on financial products. We need
the welfare state, industrial policy, and huge investment in industry, infrastructure, worker
training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such
growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term
investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge
all our friends and colleagues to read.
Loyd E. Eskildson
The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant
paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis,
but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.'
Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism."
Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics
professor at the University of Cambridge, is no enemy of capitalism, though he contends its current
conservative version should be made better. Conventional wisdom tells us that left alone, markets
produce the most efficient and just outcomes - 'efficient' because businesses and individuals
know best how to utilize their resources, and 'just' because they are rewarded according to their
productivity. Following this advice, countries have deregulated businesses, reduced taxes and
welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised
- slower growth and rising inequality, often masked by rising credit expansion and increased working
hours. Alternatively, developing Asian countries that grew fast did so following a different version
of capitalism, though to be fair China's version to-date has also produced much greater inequality.
The following summarizes some of Chang's points:
"There is no such thing as a free market" - we already have hygiene standards in
restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require
licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008,
the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by
President Bush on the grounds that it was a necessary state intervention consistent with free-market
capitalism. Chang's conclusion - free-marketers contending that a certain regulation should
not be introduced because it would restrict market freedom are simply expressing political
opinions, not economic facts or laws.
"Companies should not be run in the interest of their owners." Shareholders are
the most mobile of corporate stakeholders, often holding ownership for but a fraction of a
second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate
strategies that maximize short-term profits and dividends, usually at the cost of long-term
investments. (This often also includes added leverage and risk, and reliance on socializing
risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate
limited liability, while a boon to capital accumulation and technological progress, when combined
with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison,
Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional
managers to maximize their own prestige via sales growth and prestige projects instead of maximizing
profits. Another negative long-term outcome driven by shareholders is increased share buybacks
(less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist
estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have
prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale
layoffs from off-shoring. Governments of other countries encourage longer-term thinking by
holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater
worker representation (Germany's supervisory boards), and cross-shareholding among friendly
companies (Japan's Toyota and its suppliers).
"Free-market policies rarely make poor countries rich." With a few exceptions, all
of today's rich countries, including Britain and the U.S., reached that status through protectionism,
subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing
nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite,
not because of, protectionism. The problem with that explanation is the number of other nations
paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany,
Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong,
Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang
believes the 'official historians' of capitalism have been very successful re-writing its history,
akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He
also points out that developing nations that stick to their Ricardian 'comparative advantage,'
per the conservatives prescription, condemn themselves to their economic status quo.
"We do not live in a post-industrial age." Most of the fall in manufacturing's share
of total output is not due to a fall in the quantity of manufactured goods, but due to the
fall in their prices relative to those for services, caused by their faster productivity growth.
A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities
that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing
nations to skip manufacturing and go directly to providing services forget that many services
mainly serve manufacturing firms (finance, R&D, design), and that since services are harder
to export, such an approach will create balance-of-payment problems. (Chang's preceding points
directly contradict David Ricardo's law of comparative advantage - a fundamental free market
precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite
lacking experienced managers and natural resources, is another.)
"The U.S. does not have the highest living standard in the world." True, the average
U.S. citizen has greater command over goods and services than his counterpart in almost any
other country, but this is due to higher immigration, poorer employment conditions, and working
longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators
and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's
higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The
U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S.
in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides
the best economic model. (This is already occurring - the World Bank's chief economist, Justin
Lin, comes from China.)
"Governments can pick winners." Chang cites examples of how the Korean government
built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG),
despite lacking raw materials or experience for those sectors. True, major government failures
have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum
smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed
- e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland,
France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite
well with government-picked winners. Another problem is that business and national interests
sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest
of maintaining full employment. (However, greater unbiased U.S. government involvement would
be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations
- $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative
free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve
at the beginning of the Great Recession. Government planning allows minimizing excess capacity,
maximizing learning-curve economies and economies of scale and scope; operational performance
is enhanced by also forcing government-owned or supported firms into international competition.
Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials,
building infrastructure) are necessary for emerging economies to move into more sophisticated
"Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics
is based on the belief that the poor maximize current consumption, while the rich, left to
themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in
the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before
the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3%
in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater
paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased
their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national
output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
"U.S. managers are over-priced." First, relative to their predecessors (about 10X
those in the 1960s; now 300-400X the average worker), despite the latter having run companies
more successfully, in relative terms. Second, compared to counterparts in other rich countries
- up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase,
world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial
and Commercial Bank of China, the world's largest, being paid $234,700.
Read more ›
Willem Buiter in his FT article
After the Crisis Macro Imbalance, Credibility and Reserve-Currency suggested that after financial
crisis of 2008 there might be very long a painful deleveraging period aka
secular stagnation.In short each financial
crisis make recovery longer and longer. That's why the US will most likely face a long period
of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:
Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer
the required period of digestion. This explains for the paradox of trying to stimulate consumption
when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption.
A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately
searches a new bubble to invest in. "
... ... ...
The roots of the crisis are major international macroeconomic imbalances. Despite the fact that
the excesses of the financial system were instrumental to lead these imbalances further than otherwise
possible, insufficient regulation should not be viewed as the main factor behind the crisis. The
expenditure of central countries, spinned by all sort of financial innovations created by a globalized
financial system, was the engine of world growth. When debt became clearly excessive in central countries
and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy.
With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist.
The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even
if successful, the economies of the US and the other central countries, given the burden of excessive
debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption
of troubled assets by the public sector, in order to avoid the collapse of the financial system,
might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient
to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated
effort to increase public expenditure is successful, the central economies will remain stagnant for
as long as the excessive indebtedness of the private sector persists. The period of digestion of
excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the
effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute
to the recovery of internal demand, the temptation to central economies to also adopt a protectionist
stance will be strong.
This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and
financial sector concerns and fears and in an overestimation of the strength of the link between
financial market turmoil and financial sector deleveraging and capital losses on the one hand, and
the stability and prosperity of the wider economy on the other hand. The paper gives five examples
of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory
capture. The abstract of the paper follows next. The latest version of the entire enchilada can be
found here. Future revisions
will also be found there.
In his 2008 Vanity Fair article
Stiglitz identifies five key steps in transformation of American capitalism to Casino Capitalism
(moments of failure as he called them):
No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:
Volcker also understood that financial markets need to be regulated. Reagan wanted someone who
did not believe any such thing, and he found him in a devotee of the objectivist philosopher and
free-market zealot Ayn Rand.
If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll
get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles.
Congress repealed the Glass-Steagall Act in 1999 under Bill Clinton (Glass-Steagall
was a depression-era reform that separated commercial and investment banks)
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will
create Chinese walls to make sure that the problems of the past do not recur. As an economist,
I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend
human behavior toward self-interest—toward short-term self-interest, at any rate, rather than
Tocqueville’s "self interest rightly understood."
Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase
their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed
securities, inflating the housing bubble in the process."
Once more, it was deregulation run amuck, and few even noticed.
The Bush tax cuts, both on income and capital gains
The Bush administration was providing an open invitation to excessive borrowing and lending—not
that American consumers needed any more encouragement.
Faking the Numbers
Here he refers to bad accounting, the failure to address problems with stock options, and the
incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic
Paulson and the Flawed Bailout
Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets
and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with
money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure
that the banks would use the money to re-start lending. He even allowed the banks to pour out money
to their shareholders as taxpayers were pouring money into the banks.
The truth is most of the individual mistakes boil down to just one: a belief that markets are
self-adjusting and that the role of government should be minimal. Looking back at that belief during
hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman
Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your
ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace
by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable
that we would eventually arrive at the place we are today.
The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day.
Ideas have consequences, especially when we stop empirically testing them. Republican economics have
created great pain to America and harmed our national interest.
The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:
As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic
incentives to bend human behavior toward self-interest — toward short-term self-interest
Yes, for all their claims to science, the premise conflicts with tendencies of people.
This is the real legacy of Ronald Reagan and Alan Greenspan:
The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich
and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in
a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class
households to for-profit corporations and the richest 1% of the population. It created an unprecedented
wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class
without which democracy can’t survive.
Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in
his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations
and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."
Instead of conclusion I will reproduce the post from Sudden Debt (March
Animal Farm all animals are equal - except that some are more equal than others. All in the spirit
of law, order and the proper functioning of society, of course. Fittingly, the animals that have
chosen this role by themselves and for themselves, are the pigs.
Cut to US financial
markets today. After years of swinish behavior more reminiscent of
Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it
wasn't enough that they devoured all the "free market" food available and inundated the world with
their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they
are more equal than others.
But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely
with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly
knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all
that farms function best when animals are free to do as they please, guided solely by invisible hooves.
No regulation, no oversight, no common sense. Oh yes, and pigs fly..
So what is to be done now? Two things:
(a) Let financial markets sort themselves out, but with rock solid backing for bank depositors,
pension funds and public institutions. The public purse should not be used to bail out - directly
or indirectly - speculators in hedge funds, private equity funds and the like. Those that live
by the leverage sword can defend themselves or perish by credit destruction.
(b) Revamp public policy towards increasing earned income for working people.
In other words, the focus from now on should be on adding value by means of work and savings (capital
formation), instead of inflating assets and borrowing.
Furthermore, we should realize that in a world already inhabited by close to 7 billion people
and beset by resource depletion and environmental degradation, defending growth for growth's sake
is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder
on the accelerator is not going to make it go any faster and will likely result in a fatal crash.
Debt, and finance in general, should be left to re-size downwards to a level that better reflects
the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative"
in the worst interpretation of the words: they are designed to artificially maintain debt at levels
that myopically projects growth as far as the eye can see.
What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself
bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value.
What scares me, though, is the
statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though
he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility
and margin of error that's appropriate given the speed at which the transaction came together", he
If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets
to buy one of the largest investment banks in the world, where should all other financial firms be
trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding
into a vacuum?
Yes, profits are a form of income,
but at that point they indirectly touch wealth accumulation and sharing, and before that they fuel
wages for managers of capital and have historically been a measure that influence the price of stock,
an indirect touch on wealth accumulation. We know what has happened to basic wages/salaries, no reason
to expect they would get to share in the gains of further tax cuts, so let us face it, as you note,
huge drops in the tax rate on profits will directly benefit wealth and high income people (though
not because they would have earned it other than by lobbying).
So ok, harmonize rates with OECD,
but offset revenue losses on the personal income tax side so at least some of the upward redistribution
is in that proscribed tax base (which does not tax wealth, per the Pollack decision of the Court).
Know you know this, hope other readers get this too.
In 1913 the personal exemption
was $3K for singles and $4K for married couples and the tax rate was just 1% for the first
$20K of income. The highest bracket was $500K with a 7% income tax rate. We started off on
the correct foot anyway.
Under the 1913 law, income up
to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296,
which means only high earners were taxed at all. That is a big difference from today.
True. "We started off on the
correct foot" was in no way meant to imply that we were on our feet at all today. Back then
what you and I make today in relative terms would have put us in the 1% tax bracket and people
making $20 million or more today would have been taxed in the top bracket which was taxed at
a rate seven times higher than ours.
If profits are not income then somebody should explain to me
why all of business, finance, analysts, and almost all of
institutional and private society are obsessed, sometimes to
a pathological degree, with increasing them.
"... Still, if you know what you want computing-wise, you can buy it in a business-class model. Otherwise you're going to be stuck with an overpriced flavor of the month, in my opinion. The other virtue of business-class laptops is that basic things like durability, flexibility, and not crashing are a huge priority. ..."
"... I favour the Dell Latitude E6500. It is just old enough to have a 16:10 1920×1200 screen (matte!) and just new enough to have an Nvidia graphics card with vdpau support. Be sure to get those specs, some are lesser beasts. ..."
I have never had a Mac laptop die instantly with no warning symptoms.
One moment I was typing away, the next moment the screen was dark. I
rebooted, and it went down for the count when I was typing in my
I have a 2011 MacBook Pro that suddenly died on me and would go to
sad Mac face when I tried rebooting. After a lot of searching on the
internet it turns out the model has a design error where a paper thin
$15 data cable connects the hard drive to the motherboard by snaking
under the hd and then over the mb rubbing in all the corners against
metal as I moved my laptop from place to place. Eventually microscopic
cracks develop in the data cable and dead Mac.
After replacing the cable twice the effective solution was taping
electric tape under the cable at all spots where it rubbed and
removing the two tiny screws that held down the cable at one spot but
only worked to create stress on it. No more crashes.
Good luck on your fixit adventure Lambert, it can be strangely fun
I'm using a Windows laptop now for software engineering after years of
Macs. It's OK after to get used to it. The bash shell is nice, if not
perfect ( it is a real Ubuntu VM ). Apple UI is still better, but the
experience continues to degrade for power users as they converge on IOS for
If money were no object, Apple still is better, but you get a lot more
for the money with Windows machines, as always.
I wonder how much longer Apple will be ae to charge steep premiums for
their product line. I ditched iPhones for cheap Androids a couple years ago
with no regrets as well.
It is compatible with Ubuntu (actually most of Latitude models
are compatible) but it is OK with Windows 7 too, if you use it only
for browsing. It is now very easy to reinstall windows from Image
if something went wrong, so it you do not do any scripting or
processing, why bother. SSD disk would be a great upgrade, as
somebody here already suggested. Even 250GB is OK for most needs.
You can also get a dock for it
Dell E-Port Plus Advanced Port Replicator with USB 3.0 for E
Series Latitudes, 130W AC
Dell Latitude E6440 – Core i5 4200M / 2.5 GHz – Windows 7 Pro
64-bit – 4 GB RAM – 320 GB HDD – DVD-Writer – 14″ 1366 x 768 ( HD )
– Intel HD Graphics
I hear ya, particularly regards iphones and the experiences of many
people I've met who own them.
Into my fourth year with blackberry OS10 phone. Updates come along
once in a blue moon, phone never freezes, it's robust, typing experience
still unrivalled, OS a seamless dream, phone reception and network and
wifi connectivity, in the UK anyway, a dream.
Only drawback is the battery life if you use the Internet (easily last
all day + easily otherwise) but it looks like iphones aren't exactly all
that on this front either.
Anyway I can swap out the battery if I ever need to and carry a spare
charge bar too.
Can you run linux on any kind of machine? and how hard is it to
install and run if you're not super computer literate? If these are silly
newbie questions (I'm sure they are), feel free just to refer me to a
website or two. I've been using Mac OS X for the past few years, but
every new iteration leads to a weaker Preview application and more bugs.
i bought a windows laptop, and then removed and replaced its hard
drive with a blank one. I installed linux from a DVD (obtained by
purchasing a linux magazine, e.g., "linux format" or "linux
user/developer") following on-screen instructions. It has been smooth
sailing ever since. Meanwhile, the original hard drive with windows
8.1 sits in my spare parts box.
It's the same as installing Windows in terms of difficulty and
better for installing software. Typically, it will install out of the
box with a full suite of software and all the drivers. For your
Windows needs, running a Windows virtual machine inside Linux is a
good option, most productivity software runs seamlessly, the only
issues are for 3D graphics heavy games and applications.
I would recommend Linux Mint for newbies as the installation process
is the easiest, it comes with all the necessary media drivers, and it
gives you a Windows-like UI. Personally, I am not a big fan of the
Ubuntu's native user interface, but that comes to personal preference.
> For your Windows needs, running a Windows virtual machine
inside Linux is a good option, most productivity software runs
seamlessly, the only issues are for 3D graphics heavy games and
With KVM or Xen and capable hardware (VT-d or the AMD
equivalent), you can pass through a PCIe device such as a graphics
card to a VM. This allows you to run 3D applications at near-native
You can buy a USB stick or CD from various sources (just
Google for that), but there's not much of a reason to - it's
really easy to download the ISO and make one yourself (I'm
assuming you have access to another desktop/laptop besides the
broken one and aren't just posting from a phone; sorry if I'm
wrong). The link Foppe provided has workable instructions for
doing this on OS X using UNetbootin, but personally I just use
'dd' like: "sudo dd if=ubuntu.iso of=/dev/diskX bs=1m". But
there's nothing wrong with UNetbootin, and there's also a
Windows version if you happen to be using that:
My experience with Linux Wi-Fi drivers a decade ago sounds
similar to yours, but today I find Ubuntu and other modern
distros "just work" in this regard.
Agree on the USB and driver points.
The only things we seem to have problems with is devices
using proprietary software like the iPhone (seems to be very
roundabout to get it to recognise photos) or GPSs (updating
maps only works under Windows).
Hubby thinks Mint runs pretty nicely, but there is a new
distribution out there called Elementary OS, which looks very
similar to Mac OS and is apparently getting rave reviews.
1. What anon says. Personally, creating a USB stick using that
guide is less effort than searching for a store + having to wait,
2. USB installs faster than DVD, so not necessarily. I don't really
see the need for a book - googling will tell you all you need,
3. much better.
My experience: Bought Ubuntu Linux CD for about $5 (latest LTS
version), put it in, followed instructions, that's it. Follow
instructions for dual boot to start if desired, computer asks if you
want to run Windoze or Linux on startup. After finding I seldom chose
the Windows option, I switched to straight Linux. This was about 8
years ago. If I want to play video games, I play on Playstation or
Xbox. I've been using Open Office for all word processing and
spreadsheets for about 12 years, with good results, Linux seems to do
fine on any video / graphics I run into. Not be smug, but I manage to
practically avoid dealing with Microsoft, Apple, and Google.
The open source Linux word processors (OpenOffice, LibreOffice)
can save as either open document format (odt) or MS Word format
(doc, docx). BUT! Saving in a Word version will remove all your
citation fields (EndNote, Zotero).
Keep the working version in odt, and only save in Word format
when you're ready to submit.
I once saw a presentation held at one of those conference for
hackers, where a guy managed to install and run linux on a hard disk.
Not running linux
the hard disk. There
are sufficient electronics - processor, memory and ports - to run an
operating system on a hard disk nowadays
a) If the machine is
recent (say less than 18 months
old to be safe), linux is highly likely to run poorly on it, or not at
all if it is
recent; you must give some time to the
linux community for porting the system and developing the necessary
drivers for new computer models.
b) If the machine is
old (say more than 6 years),
mainstream linux (such as Mint, Ubuntu or OpenSuse)
may no longer run on it because these systems set requirements on the
hardware (typically the capabilities of the graphics card, or subtle
features regarding virtual memory) that old computers do not fulfill.
It is not really a problem to install linux on such hardware -
provided one selects carefully the version of linux and the kind of
graphical user interface to run, and is ready for some tweaking. I
have done this several times with Debian, for instance.
c) With a
(2000 vintage or older) or
machine, then it will require serious system knowledge and
dealing with a version of linux like Arch, Gentoo or Slackware.
d) If your machine is standard fare, between 18 months and 6 years
old, linux is not an issue at all.
how hard is it to install and run if you're not super computer
There are linux variants - Mint, Ubuntu and OpenSuse come to mind -
that have an easy installation CD/DVD-based program with reasonable
defaults. The result is a fully functional system with a graphical
user interface and lots of standard software packages coming
pre-installed, with the result comparable to a common Windows
If the machine is
new, more than likely
will run poorly or not at all, and unless it's
Linux it won't get much better because corporate software
'development' is more an annex of Brand Value than a thoughtful
process. (See also corporate-led economic 'development'.)
I detest Apple gadget-worship (no phone/tablet at all, though I get
why some people like them), but can still recommend secondhand
desktop Macs, which suffer forced obsolescence eventually but not
too quickly: staying about 5-7 years 'behind' the latest, replacing
the fairly reliable hardware only when really necessary, has always
worked for me including for music production (don't get me started
on the superiority of chrome tape & Tascam analog multitrack
machines, but a computer is useful for storage, post-production and
proliferating submixes. And crucially, the 'Mini-Mac' of c.2010 is
unusual in that it has a direct audio input, so no need even for
Midi control, let alone wireless anything, which would leave years
worth of analog studio equipment instantly helpless.)
Secondhand - wiped completely clean after purchase by someone who
really knows what s/he's doing, of course - means no need for any
'Apple Account' or other direct interaction with that baleful
organization whatsoever, and good open-source software of just
about every kind (can't speak for video or image-heavy 'social'
media, admittedly) is now readily available, ,which wasn't always
the case. I'm well aware of many people's nightmares with Mac
laptops of the same generations & similar software though: have
never been able to figure out why the relative reliability should
be so different between box types, except where those dreadful
all-wireless, design-prizewinning 'lite' Macbooks (or whatever
they're called) are concerned.
Besides installing and using windows on a VM (I've used
VirtualBox (easy) and, more recently, the built in KVM
hypervisor system to run windows and Whonix, a really nice,
secure version of Tor. Run a Tor gateway and a Tor client in
separate VMs and even if your Tor session got compromised, it is
still separate from your actual system. It presents a fake MAC
address AND a bogus IP. No way to ID your computer or IP
How crapified these days are new laptops? Seems like many people these
days are having IT issues.
They don't seem to be very upgradeable these days. Everything is
Last year, I bought a 4 or 5 year old used Dell Precision M4600 for cheap
on eBay and upgraded it with an SSD. I had to replace the battery and am
going to ghetto rig an IPS display (I screwed up and destroyed the delicate
LVDS cable, so waiting for replacement). Upgraded the RAM too to 16 GB (it
supports up to 32 GB of DDR3 in 4x 8GB SODIMMs). There isn't much room for
upgrading the GPU – I was leaning towards seeing if I could get an old M5100
Firepro for cheap.
The thing is, the Dell Precision is Dell's top of the line workstation
laptop and because it was so old, I could get it for cheap. Performance
wise, with the end of Moore's Law, Sandy Bridge is only 20% slower than
Skylake (the current latest generation – actually Kaby Lake now with the
fresh, but that's still Skylake, only a couple of hundred MHz faster).
What about new laptops these days? The quality seems to be so-so at
consumer prices. Getting used workstation grade laptops seems to be the way
– Dell Precision
– HP Z series and the older workstation grade Elitebooks (new ones are now
just consumer stuff and Z Books are now their workstation books)
– Lenovo P70 seems good too, but not as much room for upgrades (apparently
their BIOS is very restrictive)
Some of the gaming laptops like the MSI GT7x seems to be decent as well.
I've heard negative things about the Apple OLED Macbook, which apparently
has fewer ports than what is needed. Apparently iFixIt didn't rate it very
On my desktop, I dual boot between Linux Mint and Windows 10.
I agree with your list as a baseline set of requirements, but
I'd add a HiDPI display (and IPS too, as you said; the only thing a
TN panel is good for is punching). I have an rMBP and can't stand
to use my standard-res (~100 ppi) external monitor. There are
non-Mac laptops with HiDPI displays these days.
Software support for HiDPI is most mature on OS X (perfect, in
fact), but I've done cursory testing in VMs and Windows 10 and
Ubuntu's Unity seem to be getting there. There will probably be
issues with certain third-party apps on those platforms, but I'd
consider the upside to far outweigh the downside here.
Regarding keyboards (mentioned in the parent comment), it's
totally subjective. I'm in the minority that loves chiclet
keyboards. Besides the MBP keyboard, I use an Apple chiclet
keyboard on my PC. I feel I type faster and more accurately on them
I spent a while shopping for laptops not too long ago. I don't do macs,
so I can't comment on them, but after spending way too much time
researching I realized there's way better value and customization
available if you just skip to the business-class models (and way fewer
costly "features" you'll never use). Shopping for them online is a less
aesthetically pleasing experience, as their sales folks are more
concerned with reps establishing relationships with business customers
(specifically IT dept heads who are not going to be impressed by the
wonders of, for example, touch-screen PCs that raise support costs,
laptop weight, and provide little to improve productivity).
Still, if you know what you want computing-wise, you can buy it in
a business-class model. Otherwise you're going to be stuck with an
overpriced flavor of the month, in my opinion. The other virtue of
business-class laptops is that basic things like durability, flexibility,
and not crashing are a huge priority.
Employees almost universally
treat their work laptops as badly as humanly possible. Because businesses
buy in bulk and the good IT admins keep track of costs, you just can't
make money on laptops with high upkeep costs and noticeably
more-frequent-than-peer breakdowns. In the consumer market, durability is
less important than selling expensive service plans and nudging people
with means to re-up their computers more often than necessary, and basic
functionality takes a back seat to appearing innovative and cool.
All that said, Dell, etc. don't want retail consumers going to their
website and actually comparing business-class laptops to the retail
models, so sometimes you have to dig or do creative google searching (I
went with Toshiba partly because their business-class stuff is easy to
buy online). Very happy so far.
I favour the Dell Latitude E6500. It is just old enough to have a
16:10 1920×1200 screen (matte!) and just new enough to have an Nvidia
graphics card with vdpau support. Be sure to get those specs, some are
They cost $2000 when new so they tend to be lightly used by top execs
rather than hammered by code monkeys, and you can get good ones for ~$140
Business machines also have dockability, a massive bonus if it's your
main machine but you also want to take it out and about. Parts are cheap
and plentiful. The Latitudes are so easy to open up you'll laugh.
I have an Elitebook and it works fine for my needs. I use it as a
desktop replacement as well. I replaced the HD with a nice sized SSD and
upgraded the memory. After my wife borrowed my computer to take to work
at a local private school, I found 6 people had logged in on my machine
to their online accounts! I decided to get her her own Elitebook after
that. I guess they are about 4 years old now, but with the extra memory
and SSD's they are pretty decent
Also, I installed ubuntu linux on my old laptops the Elitebooks
replaced. Works fine. And free as pointed out above.
Dismal Voucher Results Surprise Researchers as DeVos Era
By Kevin Carey
The confirmation of Betsy DeVos as secretary of education
was a signal moment for the school choice movement. For the
first time, the nation's highest education official is
someone fully committed to making school vouchers and other
market-oriented policies the centerpiece of education reform.
But even as school choice is poised to go national, a wave
of new research has emerged suggesting that private school
vouchers may harm students who receive them. The results are
startling - the worst in the history of the field,
While many policy ideas have murky origins, vouchers
emerged fully formed from a single, brilliant essay *
published in 1955 by Milton Friedman, the free-market
godfather later to be awarded a Nobel Prize in Economics.
Because "a stable and democratic society is impossible
without widespread acceptance of some common set of values
and without a minimum degree of literacy and knowledge on the
part of most citizens," Mr. Friedman wrote, the government
should pay for all children to go to school.
But, he argued, that doesn't mean the government should
run all the schools. Instead, it could give parents vouchers
to pay for "approved educational services" provided by
private schools, with the government's role limited to
"ensuring that the schools met certain minimum standards."
The voucher idea sat dormant for years before taking root
in a few places, most notably Milwaukee. Yet even as many of
Mr. Friedman's other ideas became Republican Party orthodoxy,
most national G.O.P. leaders committed themselves to a
different theory of educational improvement: standards,
testing and accountability. That movement reached an apex
when the No Child Left Behind Act of 2001 brought a new focus
on tests and standards to nearly every public school
nationwide. The law left voucher supporters with crumbs: a
small demonstration project in Washington, D.C.
But broad political support for No Child Left Behind
proved short-lived. Teachers unions opposed the reforms from
the left, while libertarians and states-rights conservatives
denounced it from the right. When Republicans took control of
more governor's mansions and state legislatures in the 2000s,
they expanded vouchers to an unprecedented degree. Three of
the largest programs sprang up in Indiana, Louisiana and
Ohio, which collectively enroll more than a third of the
178,000 voucher students nationwide.
Most of the new programs heeded Mr. Friedman's original
call for the government to enforce "minimum standards" by
requiring private schools that accept vouchers to administer
standardized state tests. Researchers have used this data to
compare voucher students with similar children who took the
same tests in public school. Many of the results were
released over the last 18 months, while Donald J. Trump was
advocating school choice on the campaign trail.
The Role of Government in Education
By Milton Friedman
The general trend in our times toward increasing
intervention by the state in economic affairs has led to a
concentration of attention and dispute on the areas where new
intervention is proposed and to an acceptance of whatever
intervention has so far occurred as natural and unchangeable.
The current pause, perhaps reversal, in the trend toward
collectivism offers an opportunity to reexamine the existing
activities of government and to make a fresh assessment of
the activities that are and those that are not justified.
This paper attempts such a re-examination for education.
Education is today largely paid for and almost entirely
administered by governmental bodies or non-profit
institutions. This situation has developed gradually and is
now taken so much for granted that little explicit attention
is any longer directed to the reasons for the special
treatment of education even in countries that are
predominantly free enterprise in organization and philosophy.
The result has been an indiscriminate extension of
The role assigned to government in any particular field
depends, of course, on the principles accepted for the
organization of society in general. In what follows, I shall
assume a society that takes freedom of the individual, or
more realistically the family, as its ultimate objective, and
seeks to further this objective by relying primarily on
voluntary exchange among individuals for the organization of
economic activity. In such a free private enterprise exchange
economy, government's primary role is to preserve the rules
of the game by enforcing contracts, preventing coercion, and
keeping markets free. Beyond this, there are only three major
grounds on which government intervention is to be justified.
One is "natural monopoly" or similar market imperfection
which makes effective competition (and therefore thoroughly
voluntary ex change) impossible. A second is the existence of
substantial "neighborhood effects," i.e., the action of one
individual imposes significant costs on other individuals for
which it is not feasible to make him compensate them or
yields significant gains to them for which it is not feasible
to make them compensate him-- circumstances that again make
voluntary exchange impossible. The third derives from an
ambiguity in the ultimate objective rather than from the
difficulty of achieving it by voluntary exchange, namely,
paternalistic concern for children and other irresponsible
individuals. The belief in freedom is for "responsible"
units, among whom we include neither children nor insane
people. In general, this problem is avoided by regarding the
family as the basic unit and therefore parents as responsible
for their children; in considerable measure, however, such a
procedure rests on expediency rather than principle. The
problem of drawing a reasonable line between action justified
on these paternalistic grounds and action that conflicts with
the freedom of responsible individuals is clearly one to
which no satisfactory answer can be given.
In applying these general principles to education, we
shall find it helpful to deal separately with (1) general
education for citizen ship, and (2) specialized vocational
education, although it may be difficult to draw a sharp line
between them in practice. The grounds for government
intervention are widely different in these two areas and
justify very different types of action....
"... Stents for stable patients prevent zero heart attacks and extend the lives of patients a grand total of not at all. ..."
"... It found that atenolol didn't prevent heart attacks or extend life at all; it just lowered blood pressure. ..."
"... Of course, myriad medical innovations improve and save lives, but even as scientists push the cutting edge (and expense) of medicine, the National Center for Health Statistics reported last month that American life expectancy dropped, slightly. There is, though, something that does powerfully and assuredly bolster life expectancy: sustained public-health initiatives... ..."
If you are looking for a World Class Global Scam - you found
it documented below
"Stents for stable patients prevent
zero heart attacks and extend the lives of patients a grand
total of not at all"
My takeaway: There are HERO Physicians doing WORLD CLASS
MEDICINE (read article) but they are greatly outnumbered by
those who put the health of their wallet ahead of patient
health...so beware and be aware
'Years after research contradicts common practices,
patients continue to demand them and doctors continue to
deliver. The result is an epidemic of unnecessary and
by David Epstein, ProPublica...February 22, 2017
*This story was co-published with The Atlantic
"The 21st Century Cures Act - a rare bipartisan bill,
pushed by more than 1,400 lobbyists and signed into law in
December - lowers evidentiary standards for new uses of drugs
and for marketing and approval of some medical devices.
Furthermore, last month President Donald Trump scolded the
FDA for what he characterized as withholding drugs from dying
patients. He promised to slash regulations "big league. It
could even be up to 80 percent" of current FDA regulations,
he said. To that end, one of the president's top candidates
to head the FDA, tech investor Jim O'Neill, has openly
advocated for drugs to be approved before they're shown to
work. "Let people start using them at their own risk,"
O'Neill has argued.
Stents for stable patients prevent zero heart attacks
and extend the lives of patients a grand total of not at all.
So, while Americans can expect to see more drugs and
devices sped to those who need them, they should also expect
the problem of therapies based on flimsy evidence to
...it's not hard to understand why Sir James Black won a
Nobel Prize largely for his 1960s discovery of beta-blockers,
which slow the heart rate and reduce blood pressure. The
Nobel committee lauded the discovery as the "greatest
breakthrough when it comes to pharmaceuticals against heart
illness since the discovery of digitalis 200 years ago." In
1981, the FDA approved one of the first beta-blockers,
atenolol, after it was shown to dramatically lower blood
pressure. Atenolol became such a standard treatment that it
was used as a reference drug for comparison with other
In 1997, a Swedish hospital began a trial of more than
9,000 patients with high blood pressure who were randomly
assigned to take either atenolol or a competitor drug that
was designed to lower blood pressure for at least four years.
The competitor-drug group had fewer deaths (204) than the
atenolol group (234) and fewer strokes (232 compared with
309). But the study also found that both drugs lowered blood
pressure by the exact same amount, so why wasn't the vaunted
atenolol saving more people? That odd result prompted a
subsequent study, which compared atenolol with sugar pills.
It found that atenolol didn't prevent heart attacks or
extend life at all; it just lowered blood pressure.
2004 analysis of clinical trials - including eight randomized
controlled trials comprising more than 24,000 patients -
concluded that atenolol did not reduce heart attacks or
deaths compared with using no treatment whatsoever; patients
on atenolol just had better blood-pressure numbers when they
...Replication of results in science was a cause-célèbre
last year, due to the growing realization that researchers
have been unable to duplicate a lot of high-profile results.
A decade ago, Stanford's Ioannidis published a paper warning
the scientific community that "Most Published Research
Findings Are False." (In 2012, he coauthored a paper showing
that pretty much everything in your fridge has been found to
both cause and prevent cancer - except bacon, which
apparently only causes cancer.) Ioannidis's prescience led
his paper to be cited in other scientific articles more than
800 times in 2016 alone. Point being, sensitivity in the
scientific community to replication problems is at an
Of course, myriad medical innovations improve and save
lives, but even as scientists push the cutting edge (and
expense) of medicine, the National Center for Health
Statistics reported last month that American life expectancy
dropped, slightly. There is, though, something that does
powerfully and assuredly bolster life expectancy: sustained
"Relative risk is just another way of lying."
At the same time, patients and even doctors themselves are
sometimes unsure of just how effective common treatments are,
or how to appropriately measure and express such things.
Graham Walker, an emergency physician in San Francisco,
co-runs a website staffed by doctor volunteers called the NNT
that helps doctors and patients understand how impactful
drugs are - and often are not. "NNT" is an abbreviation for
"number needed to treat," as in: How many patients need to be
treated with a drug or procedure for one patient to get the
hoped-for benefit? In almost all popular media, the effects
of a drug are reported by relative risk reduction. To use a
fictional illness, for example, say you hear on the radio
that a drug reduces your risk of dying from Hogwart's disease
by 20 percent, which sounds pretty good. Except, that means
if 10 in 1,000 people who get Hogwart's disease normally die
from it, and every single patient goes on the drug, eight in
1,000 will die from Hogwart's disease. So, for every 500
patients who get the drug, one will be spared death by
Hogwart's disease. Hence, the NNT is 500. That might sound
fine, but if the drug's "NNH" - "number needed to harm" - is,
say, 20 and the unwanted side effect is severe, then 25
patients suffer serious harm for each one who is saved.
Suddenly, the trade-off looks grim.
Now, consider a real and familiar drug: aspirin. For
elderly women who take it daily for a year to prevent a first
heart attack, aspirin has an estimated NNT of 872 and an NNH
of 436. That means if 1,000 elderly women take aspirin daily
for a decade, 11 of them will avoid a heart attack;
meanwhile, twice that many will suffer a major
gastrointestinal bleeding event that would not have occurred
if they hadn't been taking aspirin. As with most drugs,
though, aspirin will not cause anything particularly good or
bad for the vast majority of people who take it. That is the
theme of the medicine in your cabinet: It likely isn't
significantly harming or helping you. "Most people struggle
with the idea that medicine is all about probability," says
Aron Sousa, an internist and senior associate dean at
Michigan State University's medical school. As to the more
common metric, relative risk, "it's horrible," Sousa says.
"It's not just drug companies that use it; physicians use it,
too. They want their work to look more useful, and they
genuinely think patients need to take this [drug], and
relative risk is more compelling than NNT. Relative risk is
just another way of lying."
A Different Way to Think About Medicine
For every 100 older adults who take a sleep aid, 7 will
experience improved sleep, while 17 will suffer side effects
that range widely in severity, from simple morning "hangover"
to memory loss and serious accidents. As with many
medications, most who take a sleep aid will experience
neither benefit nor harm...
"There's this cognitive dissonance, or almost professional
depression," Walker says. "You think, 'Oh my gosh, I'm a
doctor, I'm going to give all these drugs because they help
people.' But I've almost become more fatalistic, especially
in emergency medicine." If we really wanted to make a big
impact on a large number of people, Walker says, "we'd be
doing a lot more diet and exercise and lifestyle stuff. That
was by far the hardest thing for me to conceptually
appreciate before I really started looking at studies
In the 1990s, the American Cancer Society's board of
directors put out a national challenge to cut cancer rates
from a peak in 1990. Encouragingly, deaths in the United
States from all types of cancer since then have been falling.
Still, American men have a ways to go to return to 1930s
levels. Medical innovation has certainly helped; it's just
that public health has more often been the society-wide game
changer. Most people just don't believe it.
In 2014, two researchers at Brigham Young University
surveyed Americans and found that typical adults attributed
about 80 percent of the increase in life expectancy since the
mid-1800s to modern medicine. "The public grossly
overestimates how much of our increased life expectancy
should be attributed to medical care," they wrote, "and is
largely unaware of the critical role played by public health
and improved social conditions determinants." This
perception, they continued, might hinder funding for public
health, and it "may also contribute to overfunding the
medical sector of the economy and impede efforts to contain
health care costs."
It is a loaded claim. But consider the $6.3 billion 21st
Century Cures Act, which recently passed Congress to
widespread acclaim. Who can argue with a law created in part
to bolster cancer research? Among others, the heads of the
American Academy of Family Physicians and the American Public
Health Association. They argue against the new law because it
will take $3.5 billion away from public-health efforts in
order to fund research on new medical technology and drugs,
including former Vice President Joe Biden's "cancer moonshot."
The new law takes money from programs - like vaccination and
smoking-cessation efforts - that are known to prevent disease
and moves it to work that might, eventually, treat disease.
The bill will also allow the FDA to approve new uses for
drugs based on observational studies or even "summary-level
reviews" of data submitted by pharmaceutical companies.
Prasad has been a particularly trenchant and public critic,
tweeting that "the only people who don't like the bill are
people who study drug approval, safety, and who aren't paid
Judging both from comments on this blog and from some of
my mail, a significant number of Americans believe that the
answer to our health care problems - indeed, the only answer
- is to rely on the free market. Quite a few seem to believe
that this view reflects the lessons of economic theory.
Not so. One of the most influential economic papers of the
postwar era was Kenneth Arrow's "Uncertainty and the Welfare
Economics of Health Care," * which demonstrated - decisively,
I and many others believe - that health care can't be
marketed like bread or TVs. Let me offer my own version of
There are two strongly distinctive aspects of health care.
One is that you don't know when or whether you'll need care -
but if you do, the care can be extremely expensive. The big
bucks are in triple coronary bypass surgery, not routine
visits to the doctor's office; and very, very few people can
afford to pay major medical costs out of pocket.
This tells you right away that health care can't be sold
like bread. It must be largely paid for by some kind of
insurance. And this in turn means that someone other than the
patient ends up making decisions about what to buy. Consumer
choice is nonsense when it comes to health care. And you
can't just trust insurance companies either - they're not in
business for their health, or yours.
This problem is made worse by the fact that actually
paying for your health care is a loss from an insurers' point
of view - they actually refer to it as "medical costs." This
means both that insurers try to deny as many claims as
possible, and that they try to avoid covering people who are
actually likely to need care. Both of these strategies use a
lot of resources, which is why private insurance has much
higher administrative costs than single-payer systems. And
since there's a widespread sense that our fellow citizens
should get the care we need - not everyone agrees, but most
do - this means that private insurance basically spends a lot
of money on socially destructive activities.
The second thing about health care is that it's
complicated, and you can't rely on experience or comparison
shopping. ("I hear they've got a real deal on stents over at
St. Mary's!") That's why doctors are supposed to follow an
ethical code, why we expect more from them than from bakers
or grocery store owners.
You could rely on a health maintenance organization to
make the hard choices and do the cost management, and to some
extent we do. But HMOs have been highly limited in their
ability to achieve cost-effectiveness because people don't
trust them - they're profit-making institutions, and your
treatment is their cost.
Between those two factors, health care just doesn't work
as a standard market story.
All of this doesn't necessarily mean that socialized
medicine, or even single-payer, is the only way to go. There
are a number of successful healthcare systems, at least as
measured by pretty good care much cheaper than here, and they
are quite different from each other. There are, however, no
examples of successful health care based on the principles of
the free market, for one simple reason: in health care, the
free market just doesn't work. And people who say that the
market is the answer are flying in the face of both theory
and overwhelming evidence.
Though Krugman always
praises the work of Arrow on healthcare markets, Krugman
never seems much been influenced by the work.
Though praising Arrow on healthcare markets, Krugman
seemingly has spent no time on or possibly has dismissed
research affirming Arrow and has not supported the sorts of
healthcare insurance systems that would follow from accepting
the work of Arrow:
So Anne, what your saying is that "health care" is a
monopolistic industry that makes more money by restricting
care and charging more ? Allowing people that can't afford to
live, too die?
Well. yes, I agree with your presumed
hypothesis, and I admire your boldness for stepping out in
front of this moving freight train, risking your beloved
To me ? Thanks for asking.
I think that the 3 % administrative costs of the existing
single payer system are more pareto optimal than the 25 %
that the monopolists' extract. What do I know. This is
America. Dumb is not an option.
Turning again to Kenneth Arrow and healthcare markets,
assuming that Arrow was correct for all these years, and
subsequent research repeatedly has confirmed Arrow, then a
typical American market-based healthcare insurance system is
going to prove unworkable. Why then has the work of Arrow
which is at least superficially so broadly praised by
economists not been more influential in forming policy?
I won't dispute the accolades (and not only because it's in bad taste),
especially the long-standing consensus that he was "a very good guy."
All the same, I'm inclined to believe that Arrow's undoubtedly clever if
not brilliant "impossibility theorem" (Amartya Sen describes it as a 'result
of breathtaking brilliance and power') had, and speaking generally, a
pernicious effect on the discipline of economics, captured in part by
Deirdre (né Donald) McCloskey's comment that it, along with other
qualitative general theorems in the discipline, "do not, strictly speaking,
relate to anything an economist would actually want to know," in other
words, "axiomatizing economics" (which Arrow alone cannot be held
responsible for) was a turn for the worse, no doubt motivated by a desire to
bring (natural) scientific respectability and putative "rigor" (of the sort
believed to characterize physics) to a field not amenable to same (to put it
bluntly if not mildly).
For a different sort of critique of his work in this regard in economics
and the "social choice" literature, see Hausman and McPherson's Economic
Analysis, Moral Philosophy, and Public Policy (Cambridge University Press,
2nd ed., 2006).
There is also a vigorous critique of the use of this theorem by
professional economists and political scientists in S.M. Amadae's
Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice
Liberalism (University of Chicago Press, 2003).
Sen has a decidedly more favorable assessment of the "impossibility
theorem" in his book, Rationality and Freedom (Belknap Press of Harvard
University Press, 2002).
Alas, it was mischievous interpretations and application of his famous
"impossibility theorem" that unequivocally did enormous harm to the
discipline of political science, particularly with regard to democratic
theory (and by implication, praxis as well): see Gerry Mackie's Democracy
Defended (Cambridge University Press, 2003).
Donald A. Coffin
02.22.17 at 4:16 pm
"Information" has different definitions in different disciplines. One of
Arrow's last lectures explains his use of the word, and also his view of the
current state of many other things. Only 9 pages, no math:
"... and Haim Saban's opinion matters more than millions of BernieCrats because money. ..."
"... The Dems are set up pretty well for 2018. ..."
"... "We lost this election eight years ago," concludes Michael Slaby, the campaign's chief technology officer. "Our party became a national movement focused on general elections, and we lost touch with nonurban, noncoastal communities. There is a straight line between our failure to address the culture and systemic failures of Washington and this election result." ..."
"... The question of why-why the president and his team failed to activate the most powerful political weapon in their arsenal. ..."
"... Obama's army was eager to be put to work. Of the 550,000 people who responded to the survey, 86 percent said they wanted to help Obama pass legislation through grassroots support; 68 percent wanted to help elect state and local candidates who shared his vision. Most impressive of all, more than 50,000 said they personally wanted to run for elected office. ..."
"... But they never got that chance. In late December, Plouffe and a small group of senior staffers finally made the call, which was endorsed by Obama. The entire campaign machine, renamed Organizing for America, would be folded into the DNC, where it would operate as a fully controlled subsidiary of the Democratic Party. ..."
"... Republicans, on the other hand, wasted no time in building a grassroots machine of their own-one that proved capable of blocking Obama at almost every turn. Within weeks of his inauguration, conservative activists began calling for local "tea parties" to oppose the president's plan to help foreclosed homeowners. ..."
"... Your friend should share her script for success w/ the DNC leadership. ..."
Former Labor Secretary Tom Perez was elected chairman of the Democratic
National Committee Saturday, giving the party an establishment leader at a
moment when its grass roots wing is insurgent.
Mr. Perez defeated Minnesota Rep. Keith Ellison and four other candidates
in a race that had few ideological divisions yet illuminated the same rifts
in the party that drove the acrimonious 2016 presidential primary between
Vermont Sen. Bernie Sanders and former Secretary of State Hillary Clinton.
Mr. Perez fell one vote short of a majority on the first vote for
chairman, with Mr. Ellison 13 votes behind him. The four second-tier
candidates then dropped out of the race before the second ballot. On the
second ballot, Mr. Perez won 235 of 435 votes cast.
Somehow, I think most people knew that this was going to happen.
There's a good chance that Trump will end up being a 2 term president and
that 2018 will be a disaster for the Democratic Party on the scale of 2010,
2014, and 1994. Meanwhile, they will surely blame the voters and especially the
left, which is what they always do when they don't win.
I think that we should keep in mind that the US is a plutocracy and that at
this point, the Democrats aren't even pretending to be a "New Deal" party for
the people anymore. Perhaps its existence always was an outlet to contain and
co-opt the left. At least now, the message is naked: the left is expected to
blindly obey, but will never be given leadership positions.
In other words, the left is not welcome. I think that it is time for people
The only question at this point is, how hard is it going to be to form a
third party? I don't see the Left as being able to reform the Democrats very
easily. It may be so corrupt as to be beyond reform.
At least 1993, although the ideal time would have been after the
Coup of 1963, but unfortunately too many were still clueless than.
(Had more than five people and Mort Sahl ever bothered to read the
Warren Commission Report - where Lee Oswald was "positively ID'd by a
waitress for the murder of Officer Tippit:
W.C.: So you went into the room and looked at the lineup, did you
Helen Louise Markham: No, sir.
And there you have it, gentlement, a positive ID! And the rest of
the so-called report was even worse . . . .)
(Patting self on back) That's when I left it. God, was it really
that long ago?
And responding to the earlier part of the string: no, it isn't easy
to form a "3rd" party; and yes, there already is one. Just might be
time to stop nit-picking about it and help. (In Oregon, there are
about 6, two of them right-wing.)
Kshama Sawant, who is a socialist not a Green, is hoping (I think
that's the exact word) to put together a Left coalition. I think the
Green Party could be sold on that – for one thing, we would be much
the largest portion. Certainly I could, as I'm pretty tired of
spinning my wheels.
Remember, according to Gallup, the Dems are now down to 25%
affiliation (Reps at 28 – the first time they've been higher, I think
because they won the election.) Independents are the plurality by a
wide margin. Something's going to give, and we should try to get ahead
of the parade. It could easily get really nasty.
The problem with third parties is the same with the math of this
ballot. If Perez was one vote shy the first time, that means he
only picked up 18 votes the second time. So all the other
candidates mostly split the opposition. I'm sure if the democratic
establishment felt the need, they would form a few front parties.
People, you are just going to have to wait for it to blow up and
after that, coalesce around one cause; Public banking and money as
a publicly supported utility.
It took a few hundred years to recognize government is a public
function and drop monarchy.
Beats me how anyone thinks "public banking" will change
anything. In a capitalist system, banks are banks. They chase
the highest return. That's not where the public interest (qua
people) lies and never will be. And "government is a public
function" so long as it serves its mandate: to make return on
capital investment function smoothly.
For those of use who never were in the Democratic Party, this choice
ensures that many of us will be looking for another party. The DNC just
gave us the same choice as the last election – Corrupt establishment or
Fascism. The distinction these days is not worth pondering.
What people are doing right now with Donald Trump's
GOP - forcing town halls, making a ruckus, holding everyone
accountable - has to be the model for progressive change in
American politics. Doing this stuff inside the system
going to wor
k. Forming a party around ideology or ideas
isn't going to wor
k. Wearing the system down
is all that
Before this gets turned into another thing where the establishment
Democrats posture as the reasonable adults victimized by the assaults
of those left-wing baddies, let's just be very clear about what
happened here. It was the establishment wing that decided to recruit
and then stand up a candidate in order to fight an internal battle
against the left faction of the party. It was the establishment wing
that then dumped massive piles of opposition research on one of their
own party members. And it was the establishment wing that did all of
this in the shadow of Trump, sowing disunity in order to contest a
position whose leadership they insist does not really matter.
The establishment wing has made it very clear that they will do
anything and everything to hold down the left faction, even as they
rather hilariously ask the left faction to look above their
differences and unify in these trying times. They do not have any
intent of ceding anything - even small things they claim are mostly
irrelevant - to the left wing.
Reform may become possible only when the money spigot dries up.
At some point, the oligarchs may simply decide its not cost effective
to finance such losers. With no money, there are no rice bowls and so the
professional pols and their minions will either wither away or seek a new
model which may make possible a different politics.
I think it will take well under a decade to see how this plays out.