May the source be with you, but remember the KISS principle ;-) Skepticism and critical thinking is not panacea, but can help to understand the world better
Financial skeptic
The more things change in the USA casino capitalism the more they stay the same
Cruise to Frugality Island for stock holding 401K Lemmings
Neoliberal economics (aka casino
capitalism) function from one crash to another. Risk is
pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the
economy periodically. The problem are not strictly economical or political. They are ideological. Like
a country which adopted a certain religion follows a certain path, The USA behaviour after adoption
of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to
death. The difference is that debt is used instead of booze.
Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look
into the economic system making the whole system unstable. Any attempts to put some sand into the wheels
in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers
are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism
for ordinary investor (who are dragged into stock market
by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed
under liberalism (in 2000 and 2008) out of probably four (Savings
and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into
account that hypertrophied role of financial sector did not changes neither after dot-com crisis of
200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting
the name of "Great Recession").
Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark
Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes"
;-):
This morning that meant a stream of thoughts triggered by Paul Krugman’s most
recent op-ed, particularly this:
Most of all, the vast riches being earned — or maybe that should be “earned” —
in our bloated financial industry undermined our sense of reality
and degraded our judgment.
Think of the way almost everyone important missed the warning signs of an impending crisis.
How was that possible? How, for example, could Alan Greenspan have declared, just a few years
ago, that “the financial system as a whole has become more resilient” — thanks to derivatives,
no less? The answer, I believe, is that there’s an innate tendency
on the part of even the elite to idolize men who are making a lot of money, and assume that they
know what they’re doing.
As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish
in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but
this page is accessed mostly during periods of economic uncertainty. At least this was the case during
the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops
to below 1K a month.
It was clear that 2017 stock market run was detached from fundamentals. Mostly speculative run. And the current stock market
decline could well happen three months aerler or three month later but it was in the cards. It is difficult to estimate the power of
inertia in such speculative runs. Also layoffs and decline of the standard liming of workers and lower middle class still can
continue to improve the balance sheet until "Yellow Vests" moment stops them.
Jobs created now are mostly "inferior" low paid or temp/contractor jobs and the numbers just mask the cruel reality of the USA
job market.
Which in reality is dismal, especially for young and old workers. several more or less paid specialties disappeared in 2018 due
to automation (cash office worker is one). automatic cashier is supermarkets are also now more visible. So spontaneous cases
of vandalism, killings of coworkers and other form of "action of desperation" (as well as the rate of death from opioids -- which is
yet another form of the same) would not be too surprising in such an atmosphere. Even with the power of the current national
security state. Trump is playing with fire trying to cut on food stamps and implementing some other action in this program of
"national neoliberalism" which is in internal policy is almost undistinguishable from neofascism. He risk facing "Macron
situation" sooner or later.
In any case at some point Minsky moment should arrive for the stock market. I am not sure that the current decline is that start
of such an event. It might be postponed further down the line for a year or two. But it will eventually come. We can
only guess what form it might take, but with the current Apple troubles and valuations of tech sector I think it might take the form
of something similar to dot-com bubble deflation No.2
I do not see Amazon, Google, Facebook and Microsoft and other tech high flyers completely immune to the stock crash of 50%
magnitude or more. For example, Google is overly dependent on advertising revenue which can grow only by strangulating small sites
owners which use it as the advertizing platform (which it successfully implements fro several years now). But at some point owners
might revolt and start dropping it for Microsoft or other platform. Facebook might face a backlash, if people understand that
selling data about them in the part of the business model, not an aberration.
One of the most unexplainable things that happened in 2018 was dramatic fall of oil prices in the Q4. This was quite surprising
(and destructive) after the period of little or no capital investment in the new fields for three years or so. Shale oil
production increases in the USA are only possible if junk bonds can be produced along with it. Junks bonds that will never be paid.
With the current debt load and prices below $50 most of the USA shale oil companies are zombies. Most if not all of thenm are losing
money. Only return of ~$70 oil prices can save them, if anything at all. WSJ touched this topic recently.
So this surprising fall of oil prices (from around $70 to around $43 WTI) looks connected to the speculations in the "paper oil"
market.
Financialization allows for oil price to be completely detached from fundamentals for a year or even two (Saudis need over $80 I
think to balance the budget, I think; this represents "fair price" as they are one of the three largest producers).
But you will never know this unless there are shortages at gas stations. The difference is covered by inflated statistics from
IEA and similar agencies as well as "paper oil" -- future contracts which are settled in dollars.
This is the reality of "casino capitalism" ( aka neoliberalism ) with its rampant and destructive financialization.
"... The aim of the panel, called the Joint Authorities Technical Review, was to expedite getting the 737 Max into the air by creating a vehicle for achieve consensus among foreign regulators who had grounded the 737 Max before the FAA had. But these very regulators had also made clear they needed to be satisfied before they'd let it fly in their airspace. ..."
"... The FAA hopes to give the 737 Max the green light in November, while the other regulators all have said they have issues that are unlikely to be resolved by then. The agency is now in the awkward position of having a body it set up to be authoritative turn on the agency's own procedures. ..."
"... the FAA had moved further and further down the path of relying on aircraft manufactures for critical elements of certification. Not all of this was the result of capture; with the evolution of technology, even the sharpest and best intended engineer in government employ would become stale on the state of the art in a few years. ..."
"... Although all stories paint a broadly similar picture, .the most damning is a detailed piece at the Seattle Times, Engineers say Boeing pushed to limit safety testing in race to certify planes, including 737 MAX ..The article gives an incriminating account of how Boeing got the FAA to delegate more and more certification authority to the airline, and then pressured and abused employees who refused to back down on safety issues . ..."
"... In 2004, the FAA changed its system for front-line supervision of airline certification from having the FAA select airline certification employees who reported directly to the FAA to having airline employees responsible for FAA certification report to airline management and have their reports filtered through them (the FAA attempted to maintain that the certification employees could provide their recommendations directly to the agency, but the Seattle Times obtained policy manuals that stated otherwise). ..."
"... On Monday, the Post and Courier reported about the South Carolina plant that produced 787s found with tools rattling inside that Boeing SC lets mechanics inspect their own work, leading to repeated mistakes, workers say. These mechanic certifications would never have been kosher if the FAA were vigilant. Similarly, Reuters described how Boeing weakened another safety check, that of pilot input. ..."
"... As part of roughly a dozen findings, these government and industry officials said, the task force is poised to call out the Federal Aviation Administration for what it describes as a lack of clarity and transparency in the way the FAA delegated authority to the plane maker to assess the safety of certain flight-control features. The upshot, according to some of these people, is that essential design changes didn't receive adequate FAA attention. ..."
"... But the report could influence changes to traditional engineering principles determining the safety of new aircraft models. Certification of software controlling increasingly interconnected and automated onboard systems "is a whole new ballgame requiring new approaches," according to a senior industry safety expert who has discussed the report with regulators on both sides of the Atlantic. ..."
"... For instance, the Journal reports that Canadian authorities expect to require additional simulator training for 737 Max pilots. Recall that Boeing's biggest 737 Max customer, Southwest Airlines, was so resistant to the cost of additional simulator training that it put a penalty clause into its contract if wound up being necessary. ..."
"... Patrick Ky, head of the European Union Aviation Safety Agency, told the European Parliament earlier this month, "It's very likely that international authorities will want a second opinion" on any FAA decision to lift the grounding. ..."
"... Most prominently, EASA has proposed to eventually add to the MAX a third fully functional angle-of-attack sensor -- which effectively measures how far the plane's nose is pointed up or down -- underscoring the controversy expected to swirl around the plane for the foreseeable future. ..."
"... It's hard to see how Boeing hasn't gotten itself in the position of being at a major competitive disadvantage by virtue of having compromised the FAA so severely as to have undercut safety. ..."
"... has Boeing developed a plan to correct the trim wheel issue on the 787max? i haven't seen a single statement from them on how they plan to fix this problem. is it possible they think they can get the faa to re-certify without addressing it? ..."
"... Don't forget that the smaller trim wheels are in the NG as well. any change to fix the wheels ripples across more planes than just the Max ..."
"... The self-inflicted wound caused by systematic greed and arrogance – corruption, in other words. Boeing is reaping the wages of taking 100% of their profits to support the stock price through stock buybacks and deliberately under-investing in their business. Their brains have been taken over by a parasitic financial system that profits by wrecking healthy businesses. ..."
"... Shareholder Value is indeed the worst idea in the world. That Boeing's biggest stockholder, Vanguard, is unable to cleanup Boeing's operations makes perfect sense. I mean vanguards expertise is making money, not building anything. Those skills are completely different. ..."
"... One maxim we see illustrated here and elsewhere is this: Trust takes years to earn, but can be lost overnight. ..."
The FAA evidently lacked
perspective on how much trouble it was in after the two international headline-grabbing crashes
of the Boeing 737 Max. It established a "multiagency panel" meaning one that included
representatives from foreign aviation regulators, last April. A new Wall Street Journal article
reports that the findings of this panel, to be released in a few weeks, are expected to
lambaste the FAA 737 Max approval process and urge a major redo of how automated aircraft
systems get certified .
The aim of the panel, called the Joint Authorities Technical Review, was to expedite getting
the 737 Max into the air by creating a vehicle for achieve consensus among foreign regulators
who had grounded the 737 Max before the FAA had. But these very regulators had also made clear
they needed to be satisfied before they'd let it fly in their airspace.
The JATR gave them a venue for reaching a consensus, but it wasn't the consensus the FAA
sought. The foreign regulators, despite being given a forum in which to hash things out with
the FAA, are not following the FAA's timetable. The FAA hopes to give the 737 Max the green
light in November, while the other regulators all have said they have issues that are unlikely
to be resolved by then. The agency is now in the awkward position of having a body it set up to
be authoritative turn on the agency's own procedures.
The Seattle Times, which has broken many important on the Boeing debacle, reported on how
the FAA had moved further and further down the path of relying on aircraft manufactures for
critical elements of certification. Not all of this was the result of capture; with the
evolution of technology, even the sharpest and best intended engineer in government employ
would become stale on the state of the art in a few years.
However, one of the critical decisions the FAA took was to change the reporting lines of the
manufacturer employees who were assigned to FAA certification.
From a May post :
Although all stories paint a broadly similar picture, .the most damning is a detailed
piece at the Seattle Times,
Engineers say Boeing pushed to limit safety testing in race to certify planes, including 737
MAX ..The article gives an incriminating account of how Boeing got the FAA to delegate
more and more certification authority to the airline, and then pressured and abused employees
who refused to back down on safety issues .
As the Seattle Times described, the problems extended beyond the 737 Max MCAS software
shortcomings; indeed, none of the incidents in the story relate to it.
In 2004, the FAA changed its system for front-line supervision of airline certification
from having the FAA select airline certification employees who reported directly to the FAA
to having airline employees responsible for FAA certification report to airline management
and have their reports filtered through them (the FAA attempted to maintain that the
certification employees could provide their recommendations directly to the agency, but the
Seattle Times obtained policy manuals that stated otherwise).
Mind you, the Seattle Times was not alone in depicting the FAA as captured by Boeing. On
Monday, the Post and Courier reported about the South Carolina plant that produced 787s found
with tools rattling inside that
Boeing SC lets mechanics inspect their own work, leading to repeated mistakes, workers say.
These mechanic certifications would never have been kosher if the FAA were vigilant. Similarly,
Reuters described how Boeing weakened another safety check, that of pilot input.
One of the objectives for creating this panel was to restore confidence in Boeing and the
FAA, but that was always going to be a tall order, particularly after more bad news about
various 737 Max systems and Boeing being less than forthcoming with its customers and
regulators emerged.
From the Wall Street Journal :
As part of roughly a dozen findings, these government and industry officials said, the
task force is poised to call out the Federal Aviation Administration for what it describes as
a lack of clarity and transparency in the way the FAA delegated authority to the plane maker
to assess the safety of certain flight-control features. The upshot, according to some of
these people, is that essential design changes didn't receive adequate FAA attention.
The report, these officials said, also is expected to fault the agency for what it
describes as inadequate data sharing with foreign authorities during its original
certification of the MAX two years ago, along with relying on mistaken industrywide
assumptions about how average pilots would react to certain flight-control emergencies .
The FAA has stressed that the advisory group doesn't have veto power over modifications to
MCAS.
But the report could influence changes to traditional engineering principles determining
the safety of new aircraft models. Certification of software controlling increasingly
interconnected and automated onboard systems "is a whole new ballgame requiring new
approaches," according to a senior industry safety expert who has discussed the report with
regulators on both sides of the Atlantic.
If the FAA thinks it can keep this genie the bottle, it is naive. The foreign regulators
represented on the task force, including from China and the EU, have ready access to the
international business press. And there will also be an embarrassing fact on the ground, that
the FAA, which was last to ground the 737 Max, will be the first to let it fly again, and
potentially by not requiring safety protections that other regulators will insist on. For
instance, the Journal reports that Canadian authorities expect to require additional simulator
training for 737 Max pilots. Recall that Boeing's biggest 737 Max customer, Southwest Airlines,
was so resistant to the cost of additional simulator training that it put a penalty clause into
its contract if wound up being necessary.
It's a given that the FAA will be unable to regain its former stature and that all of its
certifications of major aircraft will now be second guessed subject to further
review by major foreign regulators. That in turn will impose costs on Boeing, of changing its
certification process from needing to placate only the FAA to having to appease potentially
multiple parties. For instance, the EU regulator is poised to raise the bar on the 737 Max:
Patrick Ky, head of the European Union Aviation Safety Agency, told the European
Parliament earlier this month, "It's very likely that international authorities will want a
second opinion" on any FAA decision to lift the grounding.
Even after EASA gives the green light, agency officials are expected to push for
significant additional safety enhancements to the fleet. Most prominently, EASA has proposed
to eventually add to the MAX a third fully functional angle-of-attack sensor -- which
effectively measures how far the plane's nose is pointed up or down -- underscoring the
controversy expected to swirl around the plane for the foreseeable future.
A monopoly is a precious thing to have. Too bad Boeing failed to appreciate that in its zeal
for profits. If the manufacturer winds up facing different demands in different regulatory
markets, it will have created more complexity for itself. Can it afford not to manufacture to
the highest common denominator, say by making an FAA-only approved bird for Southwest and
trying to talk American into buying FAA-only approved versions for domestic use only? It's hard
to see how Boeing hasn't gotten itself in the position of being at a major competitive
disadvantage by virtue of having compromised the FAA so severely as to have undercut
safety.
Even if Boeing finds solutions that international regulators can finally accept, their
implementation will take additional months. The AoA sensor and trim wheel issues will
likely require hardware changes to the 600 or so existing MAX airplanes. The demand for
simulator training will further delay the ungrounding of the plane. There are only some two
dozen 737 MAX simulators in this world and thousands of pilots who will need to pass
through them.
has Boeing developed a plan to correct the trim wheel issue on the 787max? i haven't seen
a single statement from them on how they plan to fix this problem. is it possible they think
they can get the faa to re-certify without addressing it?
The self-inflicted wound caused by systematic greed and arrogance – corruption, in
other words. Boeing is reaping the wages of taking 100% of their profits to support the stock
price through stock buybacks and deliberately under-investing in their business. Their brains
have been taken over by a parasitic financial system that profits by wrecking healthy
businesses.
It's not only Boeing – the rot is general and it is terrible to see the destruction
of American productive capacity by a parasitic finance sector.
Shareholder Value is indeed the worst idea in the world. That Boeing's biggest
stockholder, Vanguard, is unable to cleanup Boeing's operations makes perfect sense. I mean
vanguards expertise is making money, not building anything. Those skills are
completely different.
Shareholder value does what it intended to do, which is to maximise stock value in the
short term, even if it significantly cuts value in the long term.
By that measure allowing Boeing to take over the FAA and self-certify the 737-MAX was a
big success, because of short term maximization of stock value that resulted. It is now
someone else's problem regarding any long term harm.
Having worked at Boeing and the FAA, this report is very welcome. One thing: federal
hiring practices in a way lock out good people from working there. Very often the fed
managing some project has only a tenuous grasp is what is going on.
But has the job bc they
were hired in young and cheap, which is what agencies do with reduced budgets. That and job
postings very often stating that they are open only to current feds says it all.
So deferring
to the airline to "self-certify" would be a welcome relief to feds in many cases. At this
point, I doubt the number of their "sharpest and best intended" engineers is very high.
If
you want better oversight, then increase the number and quality of feds by making it easier
to hire, and decrease the number of contractors.
I deal with federal and state regulators (not airplane) all the time. Very well meaning
people, but in many cases are utterly unqualified to do the technical work. So it works well
when they stick to the policy issues and stay out of the technical details.
However, we have
Professional Engineers and other licensed professionals signing off on the engineering
documents per state law. You can look at the design documents and the construction
certification and there is a name and stamp of the responsible individual.
The licensing laws clearly state that the purpose of licensing is to hold public health
and safety paramount. This is completely missing in the American industrial sector due to the
industrial exemptions in the professional engineering licensing laws. Ultimately, there is
nobody technically responsible for a plane or a car who has to certify that they are making
the public safe and healthy.
Instead, the FAA and others do that. Federal agencies and the
insurance institute test cars and give safety ratings. Lawyers sue companies for defects
which also helps enforce safety.
One maxim we see illustrated here and elsewhere is this: Trust takes years to earn, but
can be lost overnight.
Boeing management and the FAA, having lost the trust of most people in the world through
their actions lately, seem to nevertheless think it will be a simple matter to return to the
former status quo. It seems as likely, or perhaps more likely, that they will never be
able to return to the former status quo. They have been revealed as poseurs and imposters,
cheerfully risking (and sometimes losing) their customers' lives so they can buy back more
stock.
This image will be (rightfully) hard for them to shake.
So people are going to quit their jobs rather than fly on Boeing planes? Joe and Marge
Six-Pack are going to choose flights not based on what they can afford but based on what make
of plane they are flying on? As if the airlines will even tell them in advance?
There are close to zero consequences to Boeing and FAA management. Click on the link to
the Purdue Sacklers debacle. The biggest inconvenience will be paying the lawyers.
From 1992 to 1999 I worked for the FAA running one of their labs in OKC. My role, among
other things, was to provide data to the Administrator on employee attitudes, business
practice changes, and policy impact on morale and safety. Back then, likely as now, it was a
common complaint heard from FAA execs about the conflict of interest of having to be both an
aviation safety regulatory agency and having to promote aviation. Congress seemed fine with
that – apparently still is. There is FAA pork in nearly every Congressional district
(think airports for example). Boeing is the latest example of how mission conflict is not
serving the aviation industry or public safety. With its headquarters within walking distance
of Capitol Hill, aviation lobbyists do not even get much exercise shuttling.
The 1996 Valuejet crash into the Florida swamps shows how far back the mission conflict
problem has persisted. Valuejet was a startup airline that was touted as more profitable than
all the others. It achieved that notoriety by flying through every FAA maintenance loophole
they could find to cut maintenance costs. When FAA started clamping down, Senate Majority
Leader Daschle scolded FAA for not being on the cutting edge of industry innovation. The
message was clear – leave Valuejet alone. That was a hard message to ignore given that
Daschle's wife Linda was serving as Deputy FAA Administrator (the #2 position) – a
clear conflict of interest with the role of her spouse – a fact not lost on
Administrator Hinson (the #1 position). Rather than use the disaster as an opportunity to
revisit FAA mission conflict, Clinton tossed Administrator Hinson into the volcano of public
outcry and put Daschle in charge. Nothing happened then, and it looks like Boeing might
follow Valuejet into the aviation graveyard.
Nothin' like regulatory capture. Along with financialized manufacturing, the cheap &
profitable will outdo the costly careful every time. Few businesses are run today with the
moral outlook of some early industrialists (not enough of them, but still present) who,
through zany Protestant guilt, cared for their reputations enough to not make murderous
product, knowing how the results would play both here and in Heaven. Today we have PR and
government propaganda to smear the doubters, free the toxic, and let loose toxins.
From food to clothing, drugs to hospitals, self-propelled skateboards to aircraft,
pesticides to pollution, even services as day care & education, it is time to call the
minions of manufactured madness to account. Dare we say "Free government from Murder
Inc."?
This is an excellent summary of the untenable situation that Boeing and the Federal
Government have gotten themselves into. In their rush to get richer the Elite ignored the
fact that monopolies and regulatory capture are always dangerously corrupt. This is not an
isolated case. FDA allows importation of uninspected stock pharmaceutical chemicals from
China. Insulin is unaffordable for the lower classes. Diseases are spreading through homeless
encampments. EPA approved new uses of environmentally toxic nicotinoid insecticide,
sulfoxaflor. DOD sold hundreds of billions of dollars of armaments to Saudi Arabia that were
useless to protect the oil supply.
The Powers-that-be thought that they would be a hegemon forever. But, Joe Biden's green
light for the Ukraine Army's attack against breakaway Donbass region on Russia's border
restarted the Cold War allying Russia with China and Iran. This is a multi-polar world again.
Brexit and Donald Trump's Presidency are the Empire's death throes.
NC readers know what the problem is as two comments above indicate clearly. Isn't the FAA
ashamed to keep conniving with the money and permitting dangerous planes to fly?
Boeing just got a WTO ruling against Airbus. It seems that one rogue produces others. Time
to clean the stable and remove the money addiction from safety regulation
I think that I can see an interesting situation developing next year. So people will be
boarding a plane, say with Southwest Airlines, when they will hear the following announcement
over the speakers-
"Ladies and gentlemen, this is your Captain speaking. On behalf of myself and the
entire crew, welcome aboard Southwest Airlines flight WN 861, non-stop service from Houston
to New York. Our flight time will be of 4 hours and 30 minutes. We will be flying at an
altitude of 35,000 feet at a ground speed of approximately 590 miles per hour.
We are pleased to announce that you have now boarded the first Boeing 737 MAX that has
been cleared to once again fly by the FAA as being completely safe. For those passengers
flying on to any other country, we regret to announce that you will have to change planes at
New York as no other country in the world has cleared this plane as being safe to fly in
their airspace and insurance companies there are unwilling to issue insurance cover for them
in any case.
So please sit back and enjoy your trip with us. Cabin Crew, please bolt the cabin doors
and prepare for gate departure."
"The Trade War Spurs China's Technology Innovators Into Overdrive" [
Industry Week ]. "In Shenzhen's glitzy financial district, a five-year-old outfit creates a
360-degree sports camera that goes on to win awards and draw comparisons to GoPro Inc.
Elsewhere in the Pearl River Delta, a niche design house is competing with the world's best
headphone makers. And in the capital Beijing, a little-known startup becomes one of the biggest
purveyors of smartwatches on the planet. Insta360, SIVGA and Huami join drone maker DJI
Technology Co. among a wave of startups that are dismantling the decades-old image of China as
a clone factory -- and adding to Washington's concerns about its fast-ascending international
rival.
Within the world's No. 2 economy, Trump's campaign to contain China's rise is in fact
spurring its burgeoning tech sector to accelerate design and invention. The threat they
pose is one of unmatchable geography: by bringing design expertise and innovation to the place
where devices are manufactured, these companies are able to develop products faster and more
cheaply ." •
Gee, didn't we have this advantage once? Thanks, neoliberals!
Sep 16, 2019 Welcome
to the world where things don't add up. For instance, some people did some things to
the Saudi Arabian oil refinery at Abqaiq over the weekend. Like, sent over a salvo of cruise
missiles and armed drone aircraft to blow it up. They did a pretty good job of disabling the
works. It is Saudi Arabia's largest oil processing facility, and for now, perhaps months, a
fair amount of the world's oil supply will be cut off. President Trump said "[we] are waiting
to hear from the Kingdom as to who they believe was the cause of this attack, and under what
terms we would proceed!" Exclamation mark his.
How many times the past few years has our government declared that "we have the finest
intelligence services in the world." Very well, then, why are we waiting for the Kingdom of
Saudi Arabia to tell us who fired all that stuff into Abqaiq? Whoever did it, it was
unquestionably an act of war. And, of course, what are we going to do about it? (And what will
some people do about it?)
Let's face it: the USA has had a hard-on for Iran for forty years, ever since they overthrew
their shah, invaded the US embassy in Tehran, and took fifty-two American diplomats and staff
hostage for 444 days. On the other hand, the Arabians and Iranians have had a mutual hard-on
for centuries, long before the Saud family was in charge of things, and back when Iran was
known as Persia, a land of genies, fragrant spices, and a glorious antiquity (while Arabia was
a wasteland of sand populated by nomads and their camels). The beef was formerly just about
which brand of Islam would prevail, Sunni or Shia. Lately (the past fifty years) it has been
more about the politics of oil and hegemony over the Middle East. Since the US invaded Iraq and
busted up the joint, the threat has existed that Iran would take over Iraq, with its majority
Shia population, especially the oil-rich Basra region at the head of the Persian Gulf. The
presence of Israel greatly complicates things, since Iran has a hard-on for that nation, too,
and for Jews especially, often expressed in the most belligerent and opprobrious terms, such as
"wiping Israel off the map." No ambiguity there. The catch being that Israel has the capability
of turning Iran into an ashtray.
The world has been waiting for a major war in the Middle east for decades, and it might have
one by close of business today. Or perhaps some people will do nothing . The
Iran-backed Houthi rebels of Yemen supposedly claimed responsibility for the attack. That's
rich. As if that rag-tag outfit has a whole bunch of million-dollar missiles and the knowledge
and capacity to launch them successfully, not to mention the satellite guidance mojo. A
correspondent suggests that the missiles were fired from a pro-Iranian military base in Iraq,
with the Houthis brought in on flying carpets to push the launch buttons.
President Trump is trumpeting America's "energy independence," meaning whatever happens over
there won't affect us. Well, none of that is true. We still import millions of barrels of oil a
day, though much less from Saudi Arabia than before 2008. The shale oil "miracle" is hitting
the skids these days. Shale oil production has gone flat, the rig-count is down, companies are
going bankrupt, and financing for the debt-dependent operations is dwindling since the
producers have demonstrated that they can't make a profit at it. They're trapped in the
quandary of diminishing returns, frontloading production, while failing to overcome steep
decline curves in wells that only produce for a couple of years.
It's also the case that shale oil is ultra-light crude, containing little heavier
distillates such as diesel and aviation fuel (basically kerosene). Alas, American refineries
were all built before shale oil came along. They were designed to crack heavier oil and can't
handle the lighter shale. The "majors" don't want to invest their remaining capital in new
refineries, and the many smaller companies don't have the ability. So, this makes necessary a
high volume of oil swapping around the world. Without diesel and aviation fuel, US trucking and
commercial aviation has a big problem, meaning the US economy has a big problem.
With the new crisis in the Middle East, benchmark West Texas Intermediate oil is up from
around $55-a-barrel to just over $60 at the market open (European Brent crude is just above
$70). That's a pop, but not a spectacular one, considering that a whole lot more damage might
ensue in the days ahead. China, Korea, and Japan stand to lose bigly if the players in the
Middle East really go at it and bust up each other's assets. If that happens, the world will
never be the same. You can kiss the global economy goodbye for good. Let's hope some people
don't do something.
Not just the Saudi's. The Houthis support Palestine, and the Muslim Brotherhood.
They also control the Straits of Mandeb where most of Israel's oil transits to Asia.
Hence the war in Yemen an the problems in the Sudan. So its no wonder its not just
the Saudi's who are fighting the Houthis. The Houthis are fighting against the U.K.,
Germany, the U.S., Israel and the UAE, who are all supporting the Saudi's. Yemen, one
of the worlds oldest civilizations
Iran never said "wiping Israel off the map."It was Ahmadinejad that said "..wipe
the Zionist entity off the map".
This author should know better than to repeat Zionist lies.
Kunstler has some huge holes in his game. He seems to take many of the US MSM
talking points as good coin. Like, exhibit A, the "wipe Israel off the map" quote
which has long since been shown to be a mis-translation. Often his bigotry also slips
like when he dismisses Houthi capabilities and gets wrong what actually hit the
refineries. These were DRONES not missiles. That is why they were able to evade the
Saudi air defenses. But Houthis are to uncouth to pull of such an operation and
moreover how dare they defend themselves or accept assistance from Iran even if it
were true they are supplying the Houthis with weapons and intelligence. Of course, he
also fails to explain, following like a dog on a leash the US media, why Iran would
launch such an attack considering it may provoke the Israelis or the US. Sure they
may hate the Saudis but they certainly do not want a war where, though they would not
technically lose, would see their society destroyed. Again Cui Bono.
Kunstlers's roots are definitely showing here. His usual barbed wit has simply
disappeared and he seems to have bitten off and swallowed whole the officialbullshit , very unwise at this stage.
"A correspondent suggests" just doesn't cut it. Correspondents have suggested all
sorts of things and he should learn to ignore these voices and rely on facts
instead.
He forgets the fact that Saudi Arabia has been waging war on Yemen since 2015 and
that the damage inflicted upon the Saudi oil installations is only a tiny fraction of
the retribution that the Saudis deserve.
Kunstler predictably forgets the fact that Israel has been illegally attacking
Iranian interests in Syria for several years and that as a result many Iranians have
been killed by Israel in recent times. The fact is that these illegal forays are also
acts of war, which of course Kunstler forgets to tell us.
One other fact pertains to his boasting that Israel could wipe Iran off the map,
which is not just bad taste, but ignores the fact that Iran has enough conventional
power to do the same to its postage stamp sized and bellicose neighbour.
We now know that when the chips are down, Kunstler will simply revert to type and
tow the crooked official zio line. We don't need Kunstler for that, we all ready have
a zionist media, a craven Congress and Trump's government of crazies, very important
facts.
If the Yemenis are being assisted by Iran I say that's a good thing. The Saudi
beasts are being assisted by our jew rulers. If I was a Yemeni blowing up that oil
infrastructure would have been on top of my list. And Israel is the country that
would be turned into an ashtray. The US is gone, over run invaded, already lost.
"Let's face it:" says Kunstler. Iran started it forty years ago, "ever since they
overthrew their shah ..." Bad Iranians attacking the USA.
But if we go back a few decades further, we find USUKisrael smashing the elected
government of Iran and installing The Shah! So Kunstler is lying when he says "their
shah"; he should say OUR shah. I think he probably knows this. He's not accidentally
mixing things up.
Catastrophic or not the neocons are itching for a big confrontation and Iran fits
the bill.
Keep in mind that most collateral damage will be suffered by the Saudis.
The US is now the biggest producer of oil, just imagine the boost that the US shale
investors will get in an industry that was about to have its bubble burst.
No longer will it struggle to break even, no it will make a good profit, more
importantly the bubble will not hit the financial sector hard.
Now KSA will suffer a blow, but that will only serve the US - new loans and new
contracts will reverse the money stream and tie the Saudi regime even more to
Washington.
As a bonus it will please the Israelis when finally Iran will be taken out and
Hezbollah isolated.
Wild cards - how hard can Iran retaliate beyond KSA, is it able and willing to
strike against Israel? How hard can it strike US targets in the region? And finally
will they go full on against the Arabian energy infrastructure. If a couple of Houthi
cruise missiles in a single strike can drop total oil production by 5% and raise
prices by 20%, imagine what kind of havoc a real Iranian campaign can cause (again
ignoring the oil bonanza the US oil industry will score).
I really believe there is now a 50/50% that Washington will gamble a full blown
war against Iran, its perceived benefits outweighing the dangers.
If anything Israel will be the deciding factor, if Tel Aviv does not fear Iranian
retribution and gives the go ahead, we'll have a war on our hands,
The US is certainly stretched thin defending the national and security interest
across the globe - aka defending and expanding the empire.
However there is enough fire power to defeat the Iranian military as an organized
force and Teheran as a government, it all depends on the US rules of engagement and
how far they are willing to push this war.
But afterwards it will be no better than Iraq or Afghanistan.
That may actually be the excuse to do what some strategists have been itching to
do since the Korean war, that is to use a couple of tactical nukes - the ultimate
terror weapon of state.
The current NPR is a strong sign in favor of nuclear weapons in conflict as it
greatly reduces the threshold. Iran's perceived threat to global oil production could
be used to set an example.
In what condition will Saudi Arabia be in, after Iran has been subdued? Also the
plethora of US bases in the area will also be fat juicy targets for Iranian
missiles.
Did the condition of South East Asia other than the ubiquitous Domino Theory,
worry many when they went to war in Viet Nam, what about Iraq?
Oil and Israel are key.
Oil prices and Israel's safety.
They want to take out Iran, but this small attack shows how vulnerable the
regional energy infrastructure really is. That can be a temporary advantage, in
boosting US oil income, but that can be easily off set by the impact of rising oil
prices on all other sectors and the public.
That's why I think it is 50/50 at best, and slowly leaning to less likely we'll
see a major escalation.
Otoh, if I were the Houthis, I'd launch a couple of additional strikes to press
the message.
Saudi Arabia supplies oil to China, so to believe Iran was behind the drone attack
on Saudi oil is a bit of a stretch. The question is was it the U.S. and Israel
coordinating that attack? Israel's influence on the U.S. in the middle east is what
is getting America running in circles
"... the attack dented the image of invincibility of Aramco's infrastructure ..."
"... Saudi Military stated the Aramco facilites were attacked with 18 missiles and 7 drones. They state cruise missiles were used. However, now they state the attack was simply "backed" by Iran. The weapons were all Iranian design. ..."
"... That Iran is backing the Houthis we already knew and nobody doubts. But those drones and missiles didn't come from Iranian territory nor were they operated by Iranian personel. It's a free market world, and everybody can buy weapons from anybody. ..."
"... The GOAL of exaggerating the attack could be to simply increase oil prices or to justify war with Iran. Tensions with Iran will be elevated for weeks, if not months. That will mean higher oil prices than otherwise. ..."
"... The timing is also suspicious because it comes just before the Israeli election and just after John Bolton was dismissed. ..."
"... Russian oil experts say 3 to 6 months to repair damage from strike as components must come from Europe according to TASS. As the remains of the uavs have been recovered their effective range can be determined. I suspect they were launched from within Saudi territory. ..."
"... It is embarrassing to the Saudis because they scarcely bother to unpack the weapons the US sends them-at premium prices - and dare not allow any of their countrymen to learn how to use them. And it is embarrassing to the Americans because they understand all this and ship over arms that don't work simply to ensure that those petrodollars circulate. ..."
"... Hence the current campaign to convince us that Iran was responsible. Mind you, that propaganda is only effective so long as the American people don't really believe it because, if they did, they might demand war (you can imagine Pelosi, Schumer and Biden insisting on it) and Washington doesn't want that. Jingoism isn't about fighting it's about threatening. ..."
1) USA: that would only help if Trump was decided to go to a hot war against Iran. By his
declarations since yesterday, we already know that isn't going to happen. He didn't even jump
to the "Iran did it!" bandwagon right away. He said he increased sanctions against Iran --
but Iran is already sanctioned to the maximum by the USA, so that's empty rhetoric.
2) Israel: wars in Israel only work as an election boost to the incumbent Prime Minister when Israel emerges with a clear
victory. ...
3) Saudi Arabia: it has a 188 billion barrel reserve to cover up for the losses for a
couple of days, so they benefited a little bit from the 20% price rise. But so did everybody
else -- including enemies of the USA, such as Russia and Venezuela. Besides, the attack
dented the image of invincibility of Aramco's infrastructure, and Saudi Arabia's image as a
neofascist ideal State.
4) Iran: Iran can block the Hormuz Strait -- a much more benign and cheap way to stop
Saudi oil from being exported. If Iran attacks its neighbors' oil infrastructure, then it
kind of states it's fair game for its neighbors to attack theirs. This is bad move for Iran
from a purely game theory standpoint, let alone from the geopolitical one.
5) Masters of the Universe: yes, the oil price went up 20% in one day. But let's remember
that even a USD 100.00 a barrel isn't that impressive from a historical standpoint: when the
Iraq invasion happened, the barrel reached USD 300.00. Yes, a selected elite benefited a lot
from this, but the USA didn't become a capitalist utopia because of that. We must not
overestimate the effects of oil prices on capitalism and, specially, on the USA: the West is
in terminal decline for a myriad of factors, not because of one silver bullet. Higher oil
prices won't save the West.
My hypothesis is this: the USA/Saudi Arabia are too embarassed to admit their
anti-aircraft weapons and systems are useless against puny drones and created a big,
subterranean enemy in the form of Iran in order to avoid public embarassment.
The Houthis are telling the truth, and they will do more attacks if the Saudis don't stop
with theirs and settle for peace.
The headline calls that the Saudi Military stated the Aramco facilites were attacked with
18 missiles and 7 drones. They state cruise missiles were used. However, now they state the
attack was simply "backed" by Iran. The weapons were all Iranian design.
That Iran is backing the Houthis we already knew and nobody doubts. But those drones and
missiles didn't come from Iranian territory nor were they operated by Iranian personel. It's
a free market world, and everybody can buy weapons from anybody.
US and Saudis say that over 20 missiles and drones were used in the attack. They say that
this showed that Iran did the attack or participated in the attack because the Houthi only
claim to have used 10 drones.
Peter AU 1 and I have said that it's possible to account for the excess damage as an
attempt to exaggerate damage caused by the Houthi attack.
The GOAL of exaggerating the attack could be to simply increase oil prices or to justify
war with Iran. Tensions with Iran will be elevated for weeks, if not months. That will mean
higher oil prices than otherwise.
The timing is also suspicious because it comes just before the Israeli election and
just after John Bolton was dismissed.
And despite Trump's backing away from his asinine "locked and loaded" comment, war with
Iran is still very possible. The Iraq War started 18 months after 9-11.
Russian oil experts say 3 to 6 months to repair damage from strike as components must come
from Europe according to TASS. As the remains of the uavs have been recovered their effective
range can be determined. I suspect they were launched from within Saudi territory.
Their main argument is that the attacks came "from the north".
If that's true, then the question remains: why didn't the Saudi radars detect it? Either b
is lying, or the Saudi military is lying.
It's really hilarious at this point: the attack caught the West so low-guarded and stunned
them so much that they can't even come up with a unified official narrative.
Houthi Armed Forces Spokesman
is at this moment tweeting a series of statements explaining how the last attack was done
that includes drone capabilities and types of munitions used!!!!!!!!!!! An example:
"Drones have fission heads carrying four precision bombs."
Given that the entire relationship between the USA and the KSA is an elaborate protection
racket the failure of all those high priced systems to protect the oil fields against
Ansrullah drones is particularly embarrassing.
It is embarrassing to the Saudis because they scarcely bother to unpack the weapons the
US sends them-at premium prices - and dare not allow any of their countrymen to learn how to
use them. And it is embarrassing to the Americans because they understand all this and ship
over arms that don't work simply to ensure that those petrodollars circulate.
Hence the current campaign to convince us that Iran was responsible. Mind you, that
propaganda is only effective so long as the American people don't really believe it because,
if they did, they might demand war (you can imagine Pelosi, Schumer and Biden insisting on
it) and Washington doesn't want that.
Jingoism isn't about fighting it's about threatening.
And, now that 57 varieties of Israeli Fascism are squabbling about whether the Prime
Minister goes to jail for theft, even that distraction is no longer useful.
Statement from the Iranians "Saudi press conference shows they are clueless about how attack
was executed and know nothing about the military capabilities of their adversary".
Seems about right. Statement by bevin is on target.
"... Committee members Sen. Tom Udall (D-N.M.) and Sen. Tim Kaine (D-Vir.) explicitly announced their opposition to war with Iran. And prominent war powers critic Sen. Jeff Markley (D-Ore.) quipped that, "[b]ack when Presidents used to follow the Constitution, they sought consent for military action from Congress, not foreign governments that murder reporters," referring to the assassination of Saudi-American journalist Jamal Khashoggi. ..."
"... "Diplomacy by Twitter has not worked so far and it surely is not working with Iran. The president needs to stop threatening military strikes via social media," said Sen. Ben Cardin (D-Mary.) in response to a question from the National Interest . "The attack on Saudi Arabia is troubling whether it was perpetrated by Houthi rebels or Iran. The U.S. should regain its leadership by working with our allies to isolate Iran for its belligerent actions in the region." ..."
"... "The U.S. should not be looking for any opportunity to start a dangerous and costly war with Iran. Congress has not authorized war against Iran and we've made it crystal clear that Saudi Arabia needs to withdraw from Yemen," he continued. ..."
"... Sen. Chris Murphy (D-Conn.) has long been a critic of Saudi Arabia's war in Yemen, proposing a successful bill to cut off U.S. support for the Saudi-led war effort. (He did not have enough votes to override the veto.) After the attacks, he wrote a long Twitter thread explaining how "the Saudis sowed the seeds of this mess" in Yemen. ..."
"... "It's simply amazing how the Saudis call all our shots these days. We don't have a mutual defense alliance with KSA, for good reason. We shouldn't pretend we do," Murphy added. "And frankly, no matter where this latest drone strike was launched from, there is no short or long term upside to the U.S. military getting more deeply involved in the growing regional contest between the Saudis and Iranians." ..."
"... "Having our country act as Saudi Arabia's bitch is not 'America First,'" said Democratic presidential candidate Tulsi Gabbard, invoking a popular Trump slogan. Sen. Rand Paul (R-Ken.), who had invoked Trump's antiwar message in a public feud with Rep. Liz Cheney (R-Wyo.) over the weekend, took to CNN to warn against striking Iran. ..."
"... "This is a regional conflict, that there's no reason the superpower of the United States needs to be getting into bombing mainland Iran. It would be a needless escalation of this," he told journalist Jake Tapper. "Those who loved the Iraq War, the Cheneys, the Boltons, the Kristols, they all are clamoring and champing at the bit for another war in Iran. But it's not a walk in the park." ..."
"... "In order to have clean ships by the first of January next year, all the world's shipping fleet from about now until the end of the year are busy emptying their tanks of heavy sulphur fuel oil and filling their tanks with low sulphur fuel oil, which is the new standard," Latham explained, claiming that the attack could have taken up to 20 percent of the world's desulphurization capacity out of commission. ..."
"... "This little accident was designed to be maximally disruptive to the world's oil market. It could not have happened at a worse time." "But what is really interesting is in Amsterdam this morning, I saw that for fuel oil -- the sulphurous stuff -- the price went down," Latham continued, speculating that international powers might delay the new environmental regulations by months and inadvertently drive down the price of oil in the long run. ..."
"... On Sunday, Trump tapped into emergency U.S. oil reserves, in order to stabilize prices. It's not clear, however, that the United States has enough oil to cope with wider attacks on energy infrastructure. "If the Iranians did this, they have shown they have pretty immense capabilities clearly," Parsi told the National Interest . "In the case of a full-scale war, imagine what this will do for the global economy. It's not that difficult to imagine what that will do to Trump's re-election prospects. I think that is something Trump understands." ..."
Retired Lt. Col. Daniel L. Davis pointed out that the puncture marks do not actually show
the origin of the attack. "Missiles can fly from almost anywhere. They have the ability to
maneuver! And certainly drones can, too," the Defense Priorities senior fellow told the
National Interest . "There hasn't been the time to do an actual analysis on the
ground, so let's wait and see."
Mark Latham, managing partner at the London-based analysis firm Commodities Intelligence,
told the National Interest that the puncture marks pointed to a cruise missile with no
explosive warhead. Removing the payload would allow the missile to carry more fuel and launch
from farther away from its target.
... ... ...
"Mr. X is a sophisticated fellow. He's sourced some Iranian cruise missiles.
He's removed the explosive payload. He's replaced the explosive payload with fuel," he said.
"So this isn't your twenty dollar Amazon drone. This is a sophisticated military operation."
"The culprit behind the Abqaiq attack is most definitely the Islamic Republic, either
directly or through one of its proxies," argued Varsha Koduvayur, a senior research analyst at
the Foundation for the Defense of Democracies.
"The attack fits the pattern of Iran signaling to the Gulf states that if it can't get its
oil out, it will cause their oil exports to become collateral damage," Koduvayur told the National Interest . "It's because of how strong our coercive financial tools are that
Iran is resorting to attacks like this: it's lashing out."
Violating an Obama-era agreement to regulate Iran's nuclear research program, the Trump
administration imposed massive sanctions on Iran's oil industry beginning in May 2018. The goal
of this "maximum pressure" campaign was to force Iran to accept a "better" deal. Since then,
Iranian forces have captured a British oil tanker and allegedly sabotaged tankers from other
countries.
There were some signals that Trump was planning to use the ongoing United Nations General
Assembly in New York to open a new
diplomatic channel with Iran, especially after the
firing of hawkish National Security Advisor John Bolton. But the weekend attack sent Trump
into reverse.
"Remember when Iran shot down a drone, saying knowingly that it was in their 'airspace'
when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a
very big lie," he said in a Monday morning Twitter post, referring to a June incident
when Iranian and American forces almost went to war. "Now they say that they had nothing to do
with the attack on Saudi Arabia. We'll see?"
He also hinted at a violent U.S. response.
"There is reason to believe that we know the culprit, are locked and loaded depending on
verification, but are waiting to hear from the Kingdom as to who they believe was the cause of
this attack, and under what terms we would proceed!" Trump wrote on Sunday.
"Saudi Arabia is not a formal treaty ally of ours, so there are no international agreements
that obligate us to come to their defense," John Glaser, director of foreign-policy studies at
the CATO Institute, stated. "This does not amount to a clear and present danger to the United
States, so no self-defense justification is relevant. He would therefore need authorization
from Congress."
Members of the Senate Foreign Relations Committee had mixed reactions to the attack.
Sen. Lindsey Graham (R-S.C.) proposed putting "on the table an attack on Iranian oil
refineries" in order to "break the regime's back." His press office did not respond to a
follow-up question from the National Interest asking whether the president would have
the authority to do so.
Amy Grappone, spokeswoman for Sen. Todd Young (R-Ind.), told the National Interest
that the Senator "will support an appropriate and proportionate response" after "studying the
latest intelligence pertaining to Iran's malign activities, including these recent attacks in
Saudi Arabia."
Sen. Bob Menendez (D-N.J.), the ranking Democrat on the committee, condemned the attack with
a backhanded insult towards Saudi Arabia. "Despite some ongoing policy differences with the
kingdom, no nation should be subjected to these kinds of attacks on it soil and against its
people," he wrote on Twitter, declining to name Iran as the culprit.
Committee members Sen. Tom Udall (D-N.M.) and Sen. Tim Kaine (D-Vir.) explicitly announced
their opposition to war with Iran. And prominent war powers critic Sen.
Jeff Markley (D-Ore.) quipped that, "[b]ack when Presidents used to follow the Constitution,
they sought consent for military action from Congress, not foreign governments that murder
reporters," referring to the assassination of Saudi-American journalist Jamal Khashoggi.
"Diplomacy by Twitter has not worked so far and it surely is not working with Iran. The
president needs to stop threatening military strikes via social media," said Sen. Ben Cardin
(D-Mary.) in response to a question from the National Interest . "The attack on Saudi
Arabia is troubling whether it was perpetrated by Houthi rebels or Iran. The U.S. should regain
its leadership by working with our allies to isolate Iran for its belligerent actions in the
region."
"The U.S. should not be looking for any opportunity to start a dangerous and costly war with
Iran. Congress has not authorized war against Iran and we've made it crystal clear that Saudi
Arabia needs to withdraw from Yemen," he continued.
Asked how he would vote on a declaration of war, the senator told the National
Interest : "Let's hope it does not come to that. Congress has not authorized war against
Iran. The majority voted to engage them diplomatically to slow their nuclear ambitions. The
international community is ready to work with the U.S. again to ease economic pressure on Iran
in exchange for their restraint. We are at a dangerous precipice."
In a statement emailed to the National Interest and posted to Twitter, Sen. Tim
Kaine (D-Va.) was even more direct: "The US should never go to war to protect Saudi oil."
Sen. Chris Murphy (D-Conn.) has long been a critic of Saudi Arabia's war in Yemen, proposing
a successful bill
to cut off U.S. support for the Saudi-led war effort. (He did not have enough votes to override
the veto.) After the attacks, he wrote a long Twitter thread
explaining how "the Saudis sowed the seeds of this mess" in Yemen.
"It's simply amazing how the Saudis call all our shots these days. We don't have a mutual
defense alliance with KSA, for good reason. We shouldn't pretend we do," Murphy added. "And
frankly, no matter where this latest drone strike was launched from, there is no short or long
term upside to the U.S. military getting more deeply involved in the growing regional contest
between the Saudis and Iranians."
But the reaction did not fall neatly along party lines.
"Iran is one of the most dangerous state sponsors of terrorism. This may well be the thing
that calls for military action against Iran, if that's what the intelligence supports," said
Sen. Chris Coons (D-Del.) in a Monday interview with Fox News. Others pointed out that
attacking Iran would contradict Trump's own principles.
"Having our country act as Saudi Arabia's bitch is not 'America First,'" said Democratic
presidential candidate Tulsi Gabbard, invoking a popular Trump slogan. Sen. Rand Paul (R-Ken.),
who had invoked Trump's antiwar message in a public feud
with Rep. Liz Cheney (R-Wyo.) over the weekend, took to CNN to warn against striking Iran.
"This is a regional conflict, that there's no reason the superpower of the United States
needs to be getting into bombing mainland Iran. It would be a needless escalation of this," he
told journalist Jake Tapper. "Those who loved the Iraq War, the Cheneys, the Boltons, the
Kristols, they all are clamoring and champing at the bit for another war in Iran. But it's not
a walk in the park."
Davis agreed with Paul's assessment. "There's too many people who have lost touch with
understanding what war is all about. They think it's easy," he told the National
Interest . "Just imagine this. What we go ahead and do this, and Iran makes good on their
threats, and American warships get sunk in the Gulf?" "This is not America's fight," he
concluded. "The American armed forces are not on loan as a Saudi defense force."
"There's another claim that the impact on oil markets is sufficient to impact the vital U.S.
interest in the free flow of energy coming out of that region, but that argument quickly
descends into absurdity when we remember that the Trump administration has been trying to
zero-out Iranian oil exports, for a host of spurious reasons," Glaser told the National
Interest . "Washington is also aggressively sanctioning Venezuela, making it harder for
Caracas to bring oil to market, too. If we really cared about the supply of oil, we wouldn't be
doing this."
In any case, the attack may not have affected oil markets in such a straightforward way.
Latham says that the attack struck an oil desulphurization facility. At the moment,
desulphurized fuel is in high demand from the shipping industry, which is rushing to comply
with new international environmental regulations.
"In order to have clean ships by the first of January next year, all the world's shipping
fleet from about now until the end of the year are busy emptying their tanks of heavy sulphur
fuel oil and filling their tanks with low sulphur fuel oil, which is the new standard," Latham
explained, claiming that the attack could have taken up to 20 percent of the world's
desulphurization capacity out of commission.
"This little accident was designed to be maximally
disruptive to the world's oil market. It could not have happened at a worse time." "But what is
really interesting is in Amsterdam this morning, I saw that for fuel oil -- the sulphurous
stuff -- the price went down," Latham continued, speculating that international powers might
delay the new environmental regulations by months and inadvertently drive down the price of oil
in the long run.
On Sunday, Trump tapped into emergency U.S. oil reserves, in order to stabilize prices. It's
not clear, however, that the United States has enough oil to cope with wider attacks on energy
infrastructure. "If the Iranians did this, they have shown they have pretty immense
capabilities clearly," Parsi told the National Interest . "In the case of a full-scale
war, imagine what this will do for the global economy. It's not that difficult to imagine what
that will do to Trump's re-election prospects. I think that is something Trump
understands."
Matthew Petti is a national security reporter at the National Interest.
"... By Jeff Bryant, a writing fellow and chief correspondent for Our Schools , a project of the Independent Media Institute. He is a communications consultant, freelance writer, advocacy journalist, and director of the Education Opportunity Network, a strategy and messaging center for progressive education policy. His award-winning commentary and reporting routinely appear in prominent online news outlets, and he speaks frequently at national events about public education policy. Follow him on Twitter @jeffbcdm. produced by Our Schools , a project of the Independent Media Institute. ..."
"... One of the first school districts to become entangled in the conglomeration of firms Wise and Sundstrom assembled was Nashville, which in 2016 chose Jim Huge and Associates to help with hiring a new superintendent. The following year the board hired Shawn Joseph, whom Huge had recommended. ..."
"... Shortly after Joseph arrived in Nashville, according to local News Channel 5 investigative reporter Phil Williams, he began pushing the district to give $1.8 million in no-bid contracts to Performance Matters, a Utah-based technology company that sells "software solutions" to school districts. ..."
"... In addition to pushing Performance Matters, Williams reported, Joseph gave an "inside track" to Discovery Education, a textbook and digital curriculum provider and another company he and his team had ties to from their work in Maryland. ..."
"... By June 2018, Nashville school board member Amy Frogge was questioning Joseph about possible connections these vendors might have to ERDI. A district audit would confirm that ERDI's affiliated companies -- including Performance Matters, Discovery Education, and six other companies -- had signed contracts totaling more than $17 million with the district since Joseph had been hired. ..."
"... "Too often, national search firms are also driven by money-making motives and/or connections with those seeking profit," Frogge contended. That conflict of interest is a concern not only in Nashville but also in other districts where school leaders with deep ties to education vendors and consultants have resulted in huge scandals that traumatized communities and cost taxpayers millions. ..."
Lambert here:
More corruption in the professional class.
By Jeff Bryant, a writing fellow and chief correspondent for Our Schools , a project of the
Independent Media Institute. He is a communications consultant, freelance writer, advocacy
journalist, and director of the Education Opportunity Network, a strategy and messaging center
for progressive education policy. His award-winning commentary and reporting routinely appear
in prominent online news outlets, and he speaks frequently at national events about public
education policy. Follow him on Twitter @jeffbcdm. produced by Our Schools , a project of the
Independent Media Institute.
In July 2013, the education world was rocked when a breaking story by Chicago independent
journalist Sarah Karp
reported that district CEO Barbara Byrd-Bennett had pushed through a no-bid $20 million
contract to provide professional development to administrators with a private, for-profit
company called SUPES Academy, which she had worked for a year before the deal transpired.
Byrd-Bennett was also listed as a senior associate for PROACT Search, a superintendent search
firm run by the same individuals who led SUPES.
By 2015, federal investigators
looked into the deal and found reason to charge
Byrd-Bennett for accepting bribes and kickbacks from the company that ran SUPES and PROACT. A
year-and-a-half later, the story made national headlines when Byrd-Bennett was convicted and
sentenced to prison for those charges. But anyone who thought this story was an anomaly
would be mistaken. Similar conflicts of interest among private superintendent search firms,
their associated consulting companies, and their handpicked school leaders have plagued
multiple school districts across the country.
In an extensive examination, Our Schools has discovered an intricate web of businesses that
reap lucrative school contracts funded by public tax dollars. These businesses are often able
to place their handpicked candidates in school leadership positions who then help make the
purchasing decision for the same businesses' other products and services, which often include
professional development, strategic planning, computer-based services, or data analytics. The
deals are often brokered in secrecy or presented to local school boards in ways that make
insider schemes appear legitimate.
As in the Byrd-Bennett scandal, school officials who get caught in this web risk public
humiliation, criminal investigation, and potential jail time, while the businesses that
perpetuate this hidden arrangement continue to flourish and grow.
The results of these scandals are often disastrous. School policies and personnel are
steered toward products that reward private companies rather than toward research-proven
methods for supporting student learning and teacher performance. School governance becomes
geared to the interests of well-connected individuals rather than the desires of teachers and
voters. And when insider schemes become public, whole communities are thrown into chaos,
sometimes for years, resulting in wasted education dollars and increased disillusionment with
school systems and local governance.
While media accounts generally frame these scandals as examples of corrupt school leaders
who got caught and brought to justice, reporters rarely delve into the corporate-operated
enterprises that undergird the whole system.
A Potent Business Model
Months before Byrd-Bennett's conviction, another individual connected to the Chicago
scandal, SUPES co-owner Gary Solomon,
pleaded guilty to wire fraud charges related to a scheme that diverted over $5 million in
public money from the Chicago contracts into his private pocket.
Solomon, who had been forced out of a previous job as a high school administrator after he
was accused of racist
comments and "preying" on female students, cofounded SUPES -- along with sister companies
PROACT Search and Synesi Associates -- with his former student Thomas Vranas, who also pleaded
guilty to charges stemming from the Chicago deals.
Although Solomon and Vranas got caught and were convicted for their scheme, they
nevertheless stumbled on a potent business model that combined PROACT's superintendent search
services with SUPES Academy professional development programs and consulting by Synesi
Associates to help districts "implement
reform strategies." Combining leader recruitment with leadership training and consulting gave
Solomon and Vranas three ways into a business relationship with a school district and multiple
ways to upsell clients into more expensive new contracts.
New administrators PROACT helped place in leadership roles could be reliable allies for
pitching professional development services to the district. School districts that had employed
SUPES might be more inclined to hire PROACT for a leadership search. And Synesi would have an
inside track for its consulting services. Further, any of the firm's school leader contacts who
became idle between full-time jobs, which often happens in this profession, would be able to
work for the firm as "associates."
School districts may have welcomed this arrangement as a form of "one-stop shopping" for
their needs, but it's not hard to see how it could lead to conflicts of interest and a veil for
fraud.
Chicago was not the only district that fell for the pitch. Shortly after news of the
Byrd-Bennett scandal broke, school districts in
DeKalb County , Illinois;
Fayette County (Lexington), Kentucky; and
Lancaster , Pennsylvania ended their contracts with PROACT.
In Iowa City, Iowa, a local reporter
found the district had a contract with Synesi Associates to conduct an audit of the
district and then hired PROACT to recruit candidates for a vacant director position. At the
same time, superintendent Stephen Murley took 34 days off work to do paid consulting for those
two organizations and for SUPES Academy.
In St. Louis ,
superintendent Kelvin Adams started consulting for SUPES shortly after the school board awarded
a $125,000 contract to the firm, Sarah Karp and Melissa Sanchez reported. The district also
awarded a $16,500 no-bid deal to Synesi.
But Solomon and Vranas did not invent this money-making strategy, nor did it die when they
were convicted and sent to jail.
From Retail Store to Mega-Mall
In June 2016, the Chicago Sun Times
reported that in the wake of the Byrd-Bennett scandal, parts of SUPES Academy were
purchased by Joseph Wise and his partner David Sundstrom. Their Chicago-based firm Atlantic
Research Partners (ARP) had already gotten at least $5 million in recent business from Chicago
schools. (Sundstrom would later
contend ARP rescinded the agreement to acquire SUPES and that the "only remaining
connection between the companies" was a licensing of training material.)
Wise founded ARP with Sundstrom in 2007 after both had been ousted from their jobs in the
Duval County, Florida, school district due to alleged
"serious misconduct." According to the ARP website, the project's mission was to launch a
"teacher-training program focused on instructional coaching and school capacity-building."
Around the same time ARP was acquiring parts of SUPES, the company also
merged with Jim Huge and Associates, a firm with deep experience in school superintendent
and other talent searches. Huge had also
served as chief strategy officer for PROACT Search. The announced rationale of the merger
was "to maximize seamless delivery of the intensive executive services to schools and school
leaders."
Undoubtedly, what Wise and Sundstrom assembled was similar to the three-part business model
Solomon and Vranas put together. What was different, though, was Wise and Sundstrom would
expand on the model with their
subsequent acquisition of Education Research and Development Institute (ERDI).
According to Louisiana school teacher and wily blogger
Mercedes Schneider , Sundstrom registered an entity called ERDI Partners as a business with a Florida address in 2017.
But an entity called ERDI had been in existence since at least 2005 when an article in
Education Week described the company as
an intermediary organization bringing together school administrators and education vendors to
help companies improve the products and services they offer school systems. Specifically, ERDI
arranged get-togethers by paying superintendents consulting fees plus expenses to travel to
conferences at luxury resorts where they would meet with company representatives. The
companies, in turn, underwrote the conferences with substantial fees paid to ERDI.
Critics of ERDI
argue that the company's model for paying school administrators for their advice on
education products inevitably leads to conflict of interest issues when those administrators
are presented with offers to purchase products promoted by ERDI.
Byrd-Bennett had a relationship with ERDI dating back to at least 2014 and was listed as senior
advisor on the firm's website while she was employed as Chicago schools' CEO.
With the acquisition of ERDI, Wise and Sundstrom could transform their business model from a
lone retail operation to a mega-mall of
education vendors of all kinds.
'The Search Was Manipulated'
One of the first school districts to become entangled in the conglomeration of firms Wise
and Sundstrom assembled was Nashville, which in 2016
chose Jim Huge and Associates to help with hiring a new superintendent. The following year
the board
hired Shawn Joseph, whom Huge had recommended.
Shortly after Joseph arrived in Nashville, according
to local News Channel 5 investigative reporter Phil Williams, he began pushing the district to
give $1.8 million in no-bid contracts to Performance Matters, a Utah-based technology company
that sells "software solutions" to
school districts.
Williams found Joseph had spoken at the company's conference and he had touted the company's
software products in promotional materials while he was employed in his previous job in
Maryland. Williams also unearthed emails
showing Joseph began contract talks with Performance Matters two weeks before he formally
took office in Nashville. What also struck Williams as odd was that despite the considerable
cost of the contract, district employees were
not required to use the software.
In addition to pushing Performance Matters, Williams reported, Joseph gave an
"inside track" to Discovery Education, a textbook and digital curriculum provider and another company he and his team had
ties to from their work in Maryland. With Joseph's backing, Discovery Education received an
$11.4 million contract to provide a new science, technology, engineering, art, and math (STEAM)
program even though a smaller company came in with a
bid that was a fraction of what Discovery proposed.
By June 2018, Nashville school board member Amy Frogge was
questioning Joseph about possible connections these vendors might have to ERDI. A district
audit would confirm that ERDI's affiliated companies -- including Performance Matters,
Discovery Education, and six other companies -- had signed contracts totaling more than $17
million with the district since Joseph had been hired.
Frogge also came to realize that all these enterprises were connected to the firm who had
been instrumental in hiring Joseph -- Jim Huge and Associates.
"The search that brought Shawn Joseph to Nashville was clearly manipulated," Frogge told Our
Schools in an email, "and the school board was kept in the dark about Joseph's previous tenure
in Maryland and his relationships with vendor companies."
Frogge said some of the manipulation occurred when the search firm told school board members
that disputes among current board members -- over charter schools, school finances, and other
issues -- indicated the district was "'too dysfunctional' to hire top-level superintendents and
therefore needed to hire a less experienced candidate."
But
previous investigations of school leadership search firms conducted by Our Schools have
found companies like these frequently forego background checks of prospective candidates they
recommend, promote favored candidates regardless of their experience or track record, and push
board members to keep the entire search process, including the final candidates, confidential
from public scrutiny.
"Too often, national search firms are also driven by money-making motives and/or connections
with those seeking profit," Frogge contended. That conflict of interest is a concern not only
in Nashville but also in other districts where school leaders with deep ties to education
vendors and consultants have resulted in huge scandals that traumatized communities and cost
taxpayers millions.
In the Youngstown City School District in Ohio, CEO Krish Mohip
became mired in questions about his role as a paid consultant for ERDI while the district
had a $261,914 contract with a partner company of ERDI. Under calls for his resignation, Mohip
left before his contract was up.
Beaufort County School District in South Carolina became the
subject of an FBI investigation because of contracts with ERDI and 30 other companies
connected to the firm while superintendent Jeff Moss worked as a paid consultant for ERDI. He
resigned from the district two years before his contract was up.
In Pittsburgh, superintendent Anthony Hamlet drew
scrutiny when reporters found the district spent more than $14 million on dozens of no-bid
contracts to firms connected to ERDI at the same time Hamlet was serving as a paid consultant
with the company.
In Baltimore County, Maryland, Shaun Dallas Dance made national
headlines when he was convicted of perjury committed during his time as superintendent of
the district. Dance had concealed $4,600 he'd been paid by ERDI. After Dance participated in
confidential meetings with vendors at an ERDI conference, the district extended contracts from
companies connected to the firm.
Obviously, school board members could avoid these conflicts by avoiding leadership search
firms and consultants connected to ERDI. But that is easier said than done.
After Baltimore County's troubles with Dance, it hired
the independent firm Ray and Associates to conduct a search to find an interim leader. The
search resulted in six finalists, from which the board chose Verletta White. Shortly after she
took the job, the board's ethics review panel found she had violated financial disclosure rules
and "used the prestige of her office or public position for private gain" by accepting
compensation from ERDI.
Indeed, superintendent search firms
frequently fail to find conflicts of interest and other problems in the candidate
background checks they conduct. And some of these firms operate side businesses that also lead
to conflict of interest issues.
A Revolving Door of Business Deals Funded by Taxpayers
One of the largest superintendent search firms in the United States, Schaumburg,
Illinois-based Hazard, Young, and Attea (HYA), is part of
the ECRA Group , a consulting firm providing an array of services to schools.
ECRA claims to have worked with over 1,000 districts, but a close examination of how the
company worked with a number of school districts in Illinois reveals how the firm uses a
revolving-door business model in which its search service rotates administrators into and out
of leadership positions while the company uses those leadership connections to successfully
upsell districts into expensive long-term consulting contracts funded by taxpayers.
ECRA's business relationships with Oak Park Elementary District 97 in Illinois go back to at
least 2010 when it was
hired to help replace outgoing superintendent Constance Collins. With HYA's
help , the district
hired Albert Roberts. In 2013, during Roberts' tenure, school board minutes
show the district considered a plan to hire ECRA to analyze the district's achievement data
at a cost of $74,000 a year. The following year, the district
hired ECRA to produce an analysis of the achievement gap between white and nonwhite
students in the district. Board minutes from 2015
show the district continuing to work with ECRA.
When Roberts retired, District 97 used HYA again for a superintendent search that resulted
in hiring
Carol Kelley. Kelley currently appears in ECRA's marketing literature touting the firm's Strategic Dashboard, which
District 97 apparently employs.
Former superintendent Collins was
hired to lead Round Lake District 116, also in Illinois, just before HYA and ECRA acquired
the district's superintendent search and strategic planning contracts. Under her tenure, Round
Lake paid ECRA $75,918 for consulting services in
2016 ,
2017 , and 2018 .
Collins
retired from Round Lake in 2018, but, according to her LinkedIn page, she became an HYA
associate in 2017. She also serves on the advisory board of ECRA, according to her bio at a nonprofit for developing school
leaders.
Another Illinois district, Niles Township High School District 219, placed its
superintendent on administrative leave after it became known she was the daughter of the
president of ECRA, which had a contract with the district worth $149,419 and $120,389 in the
final two years of her tenure. (She claimed that relationship with ECRA
dated to before she was made superintendent, but she decided to resign anyway.)
Huntley Community School District 158, also in Illinois, had contractual arrangements with
ECRA dating to at least 2009 when
John Burkey was superintendent. When Burkey
resigned in 2017, District 158
hired HYA to find a new superintendent at a cost of $17,500. At the end of a hiring process
in which HYA kept all finalists
confidential , District 158 announced it had hired Scott Rowe. Under his leadership, District 158
spent $94,980.11 on ECRA in 2018
alone.
One more example in Illinois: Evanston/Skokie School District 65 has hired ECRA for a
variety of consulting services since at least 2010 when it paid the firm $22,737.50, according
to state records, to survey
the district's administrators. By 2013, Evanston/Skokie
considered ECRA a "long-standing partner" and hired
the firm to help pick its new superintendent. Outgoing superintendent Hardy Murphy also
recommended
the district hire the firm for teacher appraisal work.
Based on HYA's recommendations
, Evanston/Skokie
hired Paul Goren in 2014, and under his tenure, checks continued to flow to ECRA's
consulting business, including $129,855.92 in 2015 .
However, Goren's tenure was troubled and brief, and in 2019 he
resigned with a $100,000 severance package. A local reporter
noticed that unmentioned in the district's settlement statement was that under his
leadership "the district's own progress reports [showed] declines in test scores across all
groups of students and district losing ground against its own five-year targets."
ECRA's own leadership has also been embroiled in conflict of interest issues. Current ECRA
president Glenn "Max" McGee
resigned from his last superintendent job, in Palo Alto, California after an outside
investigation found the district had mishandled claims of sexual assault. With a payout of
roughly $150,000, McGee, on his way out the door,
recommended the district hire HYA to conduct the search for his replacement, just after he
had accepted the offer to become leader of ECRA. The district went with McGee's
recommendation.
When asked whether this relationship among McGee, ECRA, and the Palo Alto district was a
possible conflict of interest, McGee told Our Schools in a phone call that he "stayed out of
the search" to fill his old position. Of his replacement, Don Austin from nearby Palos Verdes
Peninsula Unified School District in California, McGee admitted being an acquaintance of "many
years."
Who's to Blame?
When controversies arise over superintendents and contracts with outside services, private
firms that are responsible for pushing these hiring and outsourcing decisions are
quick to blame school board members who signed off on the decisions. And critics of public
schools frequently
use these scandals to argue that democratically elected school boards are dysfunctional and
need to be scrapped for other governance structures.
These criticisms leave a lot of context out.
First, being a school board member is customarily a part-time job paying very little money.
And school board members are elected to serve as representatives of parents and voters, not to
be experts on school finance and administration.
"School board members, although often well intentioned, are sometimes too unqualified and
uninformed to exercise effective oversight of spending, and board members are not aware of the
personal relationships and personal interests that may be driving decisions by administrative
leaders," Nashville board member Frogge explained.
Also, there are multiple ways superintendents can keep board members in the dark about the
inner workings of contractor relationships and district operations.
"From the beginning, Joseph surrounded himself with those who promoted him, including
organizations he hired to 'train' the board," Frogge explained. "Joseph also prohibited all
district employees from speaking to school board members, which prevented board members from
recognizing leadership problems during the early days of his tenure. When board members finally
began to confront Joseph about problems, including disturbing financial irregularities and his
failure to follow board policy, Joseph lied to board members, exacted retribution from those
questioning him, and stirred up controversy to distract from the issues at hand."
That said, Frogge noted school boards have alternatives to using private search firms that
promote tainted candidates willing to feed the search firms' side businesses.
"School board members need to become better informed and more savvy about profit motives and
organizations that seek to influence their selection," she wrote. "School boards can instead
opt to hire a local school boards association (for example, the Tennessee School Boards
Association) or a local recruiter with a reputation for personal integrity to conduct a search.
They can also choose to hire from within."
How school boards decide to avoid conflicts of interest with school leaders and outside
consulting firms is "critical" according to Frogge because decisions that are driven by these
insiders "can lead to catastrophic outcomes for students and staff."
Among those negative outcomes are increased community acrimony, wasted education funds, and
career debacles for what could perhaps have been promising school leaders.
In the case of Joseph and Nashville, controversies with his leadership decisions strongly
divided
the city's black community, and taxpayers were
stuck with a $261,250 bill for buying out the rest of his contract. As a result of the
fallout, Joseph
lost his state teaching license, and he
vowed never to work in the state again.
In the meantime, HYA continues to win contracts for high-profile superintendent
searches, and ERDI's conferences bringing school leaders and vendors together continue to
sell out .
After 2008 free market economists should be treated at their face value: as academic
charlatans. Now they are treated as goods which are past their shelf life in China and that's a
progress.
Notable quotes:
"... The Chinese don't need, and don't want, a bunch of arrogant pro-US intellectuals giving them lectures. I can't say I blame them. ..."
"... No, that is because after WW2 the US was the only major economy left standing that hadn't been wrecked, and they were in the box seat to set the agenda post Bretton-Woods (and cement for themselves the leading dominant role). The USD is being used increasingly as a cudgel to enforce US hegemony, and that will lead much of the world to seek alternatives. It's happening now, slowly at first, and will only gain speed from here. ..."
During my last visit I stopped by the offices of what remained of the Unirule Institute of
Economics. The well-respected organization was formed in 1993 by six economists, most
importantly Mao Yushi (no relation to Mao Zedong) and Sheng Hong. My organization, the Cato
Institute, gave the former the 2012 Milton Friedman Prize for Advancing Liberty to honor his
work on behalf of human freedom. Now retired at the age of ninety, Mao Yushi paid a price for
activism. Noted his award citation, Mao "has faced severe punishment, exile, and near
starvation for remarks critical of a command-based economy and society." The late Liu Xiaobo, a
Nobel laureate, said of Mao: his "bravery is worthy of our respect."
However, despite the hardship of its founder, Unirule was no revolutionary political
organization. Its name stood for "universal rules," essentially the rule of law. Its focus was
moving toward a more market-oriented economy. The group's work was scholarly, performed by
economists and academics. Its publications were high-brow, its books often published in China.
Unirule's international contacts were mainstream and focused on economic reform.
That Unirule prospered demonstrated how far the PRC had come from the bad old days under Mao
Zedong. Economic integration with the West by no means delivered a libertarian China. Still,
the increasingly vibrant private economy expanded personal autonomy, opening up space absent
since the PRC's founding seventy years ago.
As for politics, other than the question of the Chinese Communist Party's monopoly of power,
most issues could be at least discussed and sometimes debated in academic and other settings. A
vaguely independent media developed, which reported on misdeeds of local governments and
officials. Although this slightly diluted authoritarianism might have appeared to be weakness
to a few who pined for the days of the Cultural Revolution, the system offered a release valve
for people who had no control over their rulers.
That gave CCP officials additional ideas to consider and solutions to employ. Unirule
sponsored lectures, ran conferences, and published books. The group consulted with both local
governments and state companies. Even the national authorities appeared to respect if not
necessarily love Unirule. (In 1980 the government even invited Nobel Laureate Milton Friedman
to Beijing to get his advice.) Asked Jude Blanchette, at the Center for Strategic and
International Studies: "Without independent voices offering alternative viewpoints, how can
China's leaders make effective decisions."
Allowing discussion -- if not exactly dissent -- also might have drained away some of the
dissatisfaction that otherwise would have accumulated against the regime. The pervasiveness of
corruption and intensity of resulting public disgust highlighted the threat both from and to
Communist rule, which came much more from the natural consequences of the monopoly of power
rather than from the expression of discontent with that monopoly.
However, Xi Jinping's ascension to head of both party and government became a dramatic
political inflexion point...
... ... ...
The state agency which sponsored it dropped the affiliation. Newspapers stopped running
articles by its staffers. Discussions of its activities on social media, including the Chinese
phenomenon WeChat, were blocked. Venues cancelled Unirule events. The website was closed down.
Then the organization was twice pushed out of professional spaces. Last year the landlord,
under pressure from regulators, welded the office door shut with staffers still inside; they
had to call the police for rescue. About ten employees and a mass of books, papers and files
ultimately crammed into a small apartment ten floors up in an aged apartment building in a
distant suburb.
The group's latest book, a collection of academic papers, is ready for publication but was
rejected by the PRC's information overseers. The process has been transferred from state to
party, ensuring that everything will be assessed for its propaganda value. More seriously,
Unirule's business license was cancelled, a move the group was fighting. Sheng said he planned
to focus on economic research if the CCP interdict took hold.
... ... ...
A few weeks after my visit Unirule's life appears to have run out. The group announced that
the local government had declared it to be "unregistered and unauthorized." Although Unirule
plans to fight the diktat in court, Sheng admitted that it had essentially no chance of
prevailing and has begun the liquidation process. "We no longer have any space for survival,"
Sheng told the Wall Street Journal . He previously noted that Unirule had been careful
to follow the rules, so the Xi regime wished for the reformers to "disappear by ourselves."
Apparently Xi or someone else high up grew tired of waiting.
... ... ...
Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to
President Ronald Reagan, he is the author of several books, including Foreign Follies: America's New Global Empire .
Nixon's initiative to integrate China with the USA was the biggest strategic mistake the
US ever did. It did not lead to democratization, but rather helped build a powerful
totalitarian Orwellian state.
China clearly has a long term strategic plan how to become the
world leader, and to this end, it steals western technology, locks other nations into dept
traps, builds fifth columns in other countries, uses propaganda and cultural subversion. It
is not yet too late to withdraw all western investment from China and to isolate the country.
Due to the behavior of the CCP, it has very few actual friends.
The strategic plan and task to defeat capitalism had been handed over to China after the
Soviet Union has failed in this endeavor because economically it was no match for capitalist
USA, plus it did not integrate science and technological innovation which without it
capitalism can not be defeated.
China has achieved economic quantity and quality, and is
heading towards full scientific and technological superiority over capitalist USA in the long
run.
In this way socialism through science defeats and overtakes capitalism. Science and more
science, the only way to defeat capitalism.
out of the 3 countries - USA, Russia, China - most of the world is clearly happy with USA
having the leading role, because it is the least evil. Yes, USA is not perfect, Trump is not
a great leader (to say it diplomatically), they have made mistakes (the invasion of Iraq
etc), but they are still much better than USSRv2.0 or totalitarian China.
Even in Asia, China
is widely disliked due to its arrogant and bullying behavior. The Japanese, the Koreans, the
Vietnamese, the Indonesians, none of them really like China.
The fact, that US dollar is the
leading currency has much to do with the world public perception of the stability of the
country. Ie all countries believe the US is the most stable country. So China will have real
trouble convincing the world that yuan is better. I do not believe that China will become a
leading power anytim soon.
You can keep telling yourself that, but its a crock and we non-Americans know it only too
well. Dishonesty and an inability to face truth seems to be an American trait, and the
corruption is only growing worse as the US declines.
"The Japanese, the Koreans, the Vietnamese, the Indonesians, none of them really like
China"
News for you buddy. None of these nations like each other... LOL!! You ever hear Koreans
talking about the Japanese? Now that's hatred...
" The fact, that US dollar is the leading currency has much to do with the world public
perception of the stability of the country."
No, that is because after WW2 the US was the only major economy left standing that hadn't
been wrecked, and they were in the box seat to set the agenda post Bretton-Woods (and cement
for themselves the leading dominant role). The USD is being used increasingly as a cudgel to
enforce US hegemony, and that will lead much of the world to seek alternatives. It's
happening now, slowly at first, and will only gain speed from here.
Pound Sterling used to dominate the world, now where is it? In the future, people will say
the same of the greenback.
I traveled for 1 year across Asia - SE Asia, Thailand, Vietnam, Cambodia, Laos, Indonesia
and 5 months across china. China is almost universally disliked all over Asia due to its
arrogant behavior. And even the famous Chinese investments are increasingly being perceived
as a form of Chinese neocolonialism and rejected
https://www.washingtonpost....
You know how African-Americans commit all sorts of violent crimes, hate speech, and racist
slurs just because they were victims of racial discrimination in America decades ago? It's
the same justification for violence Chinese mainlanders commit against everyone else just
because they suffered from century of humiliation. I'm suspecting that the CCP/PLA is being
coached by the black lefists in the US who have deep hatred against their perceived WASP
establishment. The pattern of angst and diatribes are almost the same.
In the survey you posted above, China is more popular than the USA in Indonesia. Other
countries like Malaysia, Laos, Bangladesh, North Korea are missing. Also, people generally tell to English speaking foreigners what they expect they want to
hear. If the survey was made by Chinese, the results would be different.
The answer is simple and obvious. Democracy and rule of law means that they all go to
jail. In all post-authoritarian shifts, the judicial branch of the government goes into
overdrive, prosecuting past leaders for their crimes. They're really stuck to
authoritarianism no-matter how hard they want democracy.
The CCP is just like a mafia. You won't get in unless you have blood in your hands, and
death is the only way out (unless you can defect to another country and if you can stomach
your immediate family members going to jail for you).
China is doing just great. Its citizens are enjoying a quality of life unprecedented in
China's history (even the author do not dispute this). So why should a democratic majority
89% (PEW) happy individuals must suffer for the selfish few?
History has shown that intellectuals make lousy leaders but great at fomenting chaos +
rebellions. And everyone knows that "soft-spoken criticisms", when weaponized, can kill
millions just as effectively as a nuclear bomb!
Our results have profound implications for the idea that the financial markets are Pareto
efficient which I explore
here in my paper on asset pricing in perpetual youth models. In that paper I assume that
monetary and fiscal policy are passive to
generate realistic asset market volatility. My paper with Pawel shows that the same results can
be generated in a realistic OLG model even when monetary and fiscal policy are active.
The way out of this apparent degeneracy of theory is to adopt an idea I first advocated in
my book on self-fulfilling
prophecies . The way that people form beliefs must be modeled as a new fundamental with the
same methodological status as preferences, technologies and endowments.
Our paper makes a mockery of the attempt to ground neoclassical theory in
'fundamentals'.
Much has justifiably been made of President Trump's blustering, bullying approach to trade
policy, which has already had catastrophic effects on many American farmers. Now, Trump's
trade war with China is having similarly disastrous repercussions internationally. One need
look no further than longtime US ally Germany, a prosperous country now facing its first
major recession since Chancellor Angela Merkel took power 13 years ago.
A bit of context: Germans value stability above all else. That the German word for debt
– Schuld – is also the word for guilt, is a linguistic testament to a deep
cultural truth. Debt is considered so shameful that Germans don't have real credit cards,
will rent for decades instead of buying property, and are comfortable living with a rapidly
decaying infrastructure that simply would not fly in other wealthy European countries.
Part of the reason behind Merkel's record-tying four electoral victories is that Germans
are not prone to asking questions when everything seems to be working fine, and their economy
-- built on excessive exports and domestic austerity -- has, thus far, served them well. The
2008 financial crisis hit German businesses hard, but unemployment barely increased. For
nearly two decades now, Germany has survived by capitalizing on other countries' spending and
exporting job cuts to its trade partners.
Indeed, Germany's trade surplus in 2018 was the largest in the world for the third year
running, reaching $299 billion and accounting for over 8 percent of GDP. ...
With the US-China spat driving the cost of materials up and the number of orders for
exported goods down, the key German sectors of manufacturing, trade, services, and
construction have contracted so quickly and sharply that business leaders could hardly
believe the numbers were true.
Yet, according to Germany's highly-regarded IFO Institute's Business Climate Index, there
is good reason to believe these sectors have "not a single ray of light" for the immediate
future.
Despite Washington's justifiable concerns over data security, Merkel's government has
invited Huawei to build up Germany's woeful digital infrastructure and is planning a massive
EU-China summit for when Berlin takes over the rotating European presidency in 2020. ...
One of the key U.S. borrowing markets saw a massive surge Monday, a sign the Federal
Reserve is having trouble controlling short-term interest rates.
Amid the settlement of Treasury coupon auctions and the influx of quarterly corporate tax
payments, the rate on overnight repurchase agreements soared by 153 basis points to 3.80%,
the largest daily increase since December, based on ICAP pricing.
---------
The would be Treasury trying to tilt the curve, deposit short borrow long. Finance, in
general, is rescaling to accommodate the next 2 trillion in debt while rolling over trillions
of 'Uncle can do it later' debt. A quick downturn, readjustment, and the 'Uncle do it later'
payments to the wealthy will continue.
This is common, our progressive tribe has moles who suddenly rush off and do a deal with
the wealthy leaving the rest of us in the dark.
Repo Squeeze Threatens to Spill Over Into Funding Markets
By Stephen Spratt
September 17, 2019, 3:19 AM PDT Updated on September 17, 2019, 5:24 AM PDT
Cross-currency basis, FX forwards, eurodollar futures shift
Sale of $78 billion in Treasuries led to sudden cash squeeze
----------------
Treasury is ahead of finance in paying for the 'Uncle do it later' trick. The short rate
has jumped 10 basis points, not much but there was a reading on the overnight market of 7%.
This may mean nothing, but more likely means higher consumer credit charges. W have to pay
for 'Uncles later'.
Homoploutia, a concept I introduce in "Capitalism, Alone". In today's liberal capitalism,
it is common that the same people are rich *both* in terms of capital they own and earnings
they receive. This was almost unheard of in classical capitalism where capitalists seldom
doubled as wage workers.
So here, using @lisdata, you have a nice illustration of advanced capitalist countries
where people in the top decile by capital and labor income increasing coincide (right end)
and Brazil and Mexico where they do not.
Note the ambivalence * of homoploutia: in some sense it is desirable (and risk-reducing)
that capitalists also work, or that high earners possess capital too. But in another way, it
makes inequality-reducing policies more difficult.
Yes, under neoliberalism like under Bolshevism, your social position is not determined solely
by the capital you own. It is also determined by the position you hold in the industry or
government (and your earnings/wages are derivative of that).
So we see the reincarnation of the idea of Soviet Nomenklatura on a new level in a
different social system. The term can still serve its purpose, and IMHO is better than
"Homoploutia."
It is also interesting that older middle-class folk, who due to their private savings,
401K, Roth and ISA accounts, SS pension (say $6K-7K a month for a couple), and sometimes
government or industry pension are formally millionaires (with some multimillionaires) are
not generally viewed as belonging to the upper 10%. They are looked at as an aberration by
the most sociologists.
That's because they are now retired and no longer hold any meaningful for the upper 10%
level position in the industry or government. In other words, they do not belong to
Nomenklatura. Or more correctly no longer belong to Nomenklatura (for those who retired from
high level positions)
And, correspondingly, often are treated as junk in the neoliberal society.
Even if the timing remains vague and the conditions uncertain, the government does seem to
have decided to launch a vast reform of the retirement pensions system, with the key element
being the unification of the rules applied at the moment in the various systems operating
(civil servants, private sector employees, local authority employees, self-employed, special
schemes, etc).
Let's make it clear: setting up a universal system is in itself an excellent thing, and a
reform of this type is long overdue in France. The young generations, particularly those who
have gone through multiple changes in status (private and public employees, self-employed,
working abroad, etc), frequently have no idea of the retirement rights which they have
accumulated. This situation is a source of unbearable uncertainties and economic anxiety,
whereas our retirement system is globally well financed.
But, having announced this aim of clarification and unification of rights, the truth is that
we have not said very much. There are in effect many ways of unifying the rules. Now there is
no guarantee that those in power are capable of generating a viable consensus in this respect.
The principle of justice invoked by the government seems simple and plausible: one Euro
contributed should give rise to the same rights to retirement, no matter what the scheme, and
the level of salary or of earned income. The problem is that this principle amounts to making
the inequalities in income as they exist at present sacrosanct, including when they are of
mammoth proportions (under-paid piece work for some, excessive salaries for others), and to
perpetuating them at the age of retirement and dependency which is in no way particularly
"fair".
Aware of the difficulty, the High Commissioner Jean-Paul Delevoye's Plan stipulates that a
quarter of the contributions will continue to be allocated to "solidarity', that is to say, for
example, to subsidies for children and interruptions of career, or to finance a minimum
retirement pension for the lowest salaries. The difficulty is that the way this calculation has
been made is highly controversial. In particular, this estimate purely and simply takes no
account of social inequalities in life expectancy. For example, if a low wage earner spends 10
years in retirement while a highly-paid manager spends 20 years, we have forgotten to take into
account the fact that a large share of the contributions of the low wage earner serves in
practice to pay the retirement of the highly-paid manager (which is in no way compensated for
by the allowance for strenuous and tedious work)
More generally, there are naturally multiple parameters to be fixed to define what one
considers to be "solidarity". The government's proposals are respectable but they are far from
being the only ones possible. It is essential that a broad public debate take place and that
alternative proposals should emerge. The Delevoye Plan for example provides for a replacement
rate equal to 85% for a full career (43 years of contributions) at Minimum Wage level. This
rate would then very rapidly fall to 70%, to only 1.5 Smic (Minimum Wage) before stabilising at
this precise level of 70% until approximately 7 Smic ( 120,000 Euros gross annual salary). This
is one possible choice, but there are others. One could thus imagine that the replacement rate
would go gradually from 85% of the Smic to 75%-80% around 1.5 – 2 Smic, before gradually
falling to around 50%-60%, approximately 5-7 Smic.
Similarly the government's project provides for a financing of the system by a retirement
contribution of which the global rate would be fixed at 28.1% on all the gross incomes below
120,000 Euros per annum, before falling suddenly to only 2.8% beyond this threshold. The
official justification is that retirement rights in the new system would be capped at this wage
level. The Delevoye Report goes as far as congratulating themselves because the super-managers
will nevertheless be subject to this contribution (which will not be capped) of 2.8%, to mark
their solidarity with the older generations. In passing, once again no account is taken of the
salaries between 100,000 Euros and 200,000 Euros which usually correspond to very long life
expectancies and which benefit greatly from the contributions paid by the lower waged with
shorter life expectancies. In any event, this contribution of 2.8% to solidarity by those
earning over 120,000 Euros is much too low, particularly given the levels of remuneration;
their very legitimacy is open to challenge.
More generally it is perhaps time to abandon the old idea according to which reduction of
inequalities should be left to income tax, while the retirement schemes should content
themselves with reproducing them. In a world in which fabulous salaries and questions of
retirement and dependency have taken on a new importance, the most legible norms of justice
could be that all levels of salary (including the highest) should finance the retirement scheme
at the same rates (even if the pensions themselves are capped) while leaving to income tax the
task of applying higher levels to the top incomes
To be clear: the present government has a big problem with the very concept of social
justice. As everyone knows, it has chosen from the outset to grant huge fiscal gifts to the
richest (suppression of the wealth tax (the ISF), the flat tax on dividends and incomes). If
today it does not demand a significant effort from the most privileged it will have
considerable difficulty in convincing the public that its pension reform is well-founded.
"... In our current economy, corporations have sunk $2.5 trillion in buying back their own stocks because this generates the highest work-free return. This reflects two realities: ..."
"... Thanks to the Federal Reserve and other central banks injecting trillions of dollars of nearly free credit into the financial sector, corporations can borrow billions of dollars to play with at near-zero rates that are historically unprecedented. ..."
"... Recall the basic mechanism of stock buybacks: By reducing the number of shares outstanding, sales and profits go up on a per share basis -- not because the company generated more revenues and profits, but because the number of shares has been reduced by the buybacks. ..."
"... A bubble economy is a sick economy, for bubbles are proof there is too much capital chasing too few productive uses for that capital. ..."
The
one we're most familiar with
is simple
human greed
,
the desire to exploit a windfall and catch a work-free ride to riches.
The
second dynamic
gets much less attention.
Financial
manias arise when there is no other more productive, profitable use for capital. And these periods
occur when there is an abundance of credit available to inflate the bubbles
.
Humans respond to the incentives the system presents: If dealing illegal drugs can net $20,000 a
month compared with $2,000 a month from a regular job, a certain percentage of the workforce is going
to deal drugs.
In our current economy, corporations have sunk $2.5 trillion in buying back their own stocks
because this generates the highest work-free return. This reflects two realities:
Corporations can't find any other more productive, profitable use for their capital than buying
back their own shares (enriching the managers via stock options and the 10% of American households
who own 93% of the stocks).
Thanks to the Federal Reserve and other central banks injecting trillions of dollars of nearly
free credit into the financial sector, corporations can borrow billions of dollars to play with at
near-zero rates that are historically unprecedented.
So borrow billions at 2.5%, pour it all into buying back your own stock and reap the gains as your
stock rises 10%.
Recall the basic mechanism of stock buybacks: By reducing the number of shares outstanding, sales
and profits go up on a per share basis -- not because the company generated more revenues and profits,
but because the number of shares has been reduced by the buybacks.
(Note to New Green Deal advocates: If corporations reckoned they could earn more by investing
the $2.5 trillion in alternative energy projects rather than stock buybacks, they would have done so.)
As various sources have outlined, corporate stock buybacks have been the primary driver of higher
stock prices.
This is driving the third dynamic of bubbles
:
As the bubble continues inflating beyond any rational valuation,
rational investors
throw in the towel and join the frenzy
. Once again, this willingness to abandon
rationality is partly fueled by greed and also by a dearth of other more attractive investments.
A bubble economy is a sick economy, for bubbles are proof there is too much capital chasing
too few productive uses for that capital.
The Fed and other central banks have created trillions of dollars, yuan, euros and yen for
corporations and financiers to play with and, to a lesser degree, for homebuyers to play with via low
mortgage rates and federal guarantees on mortgages.
As a result, the housing bubble is the one regular folks can play. And despite claims that it's not
a bubble because of organic demand, housing is definitely in a bubble, along with stocks and bonds,
art, etc.
When you create trillions of dollars, yuan, euros and yen out of thin air, you create the
incentives to inflate bubbles. When your real economy is sick and offers few productive uses for all
this excess capital, that only adds fuel to the speculative fire.
Here's the problem
: All bubbles burst, regardless of other conditions.
Creating more trillions won't change this, adding more gamblers to the casino won't change this,
claiming a bubble economy is healthy won't change this and promising a trade deal with China won't
change this.
All of America's bubbles will pop, and sooner rather than later.
The stock market
moves a bit faster than the housing and bond markets, but the bubbles that are visible in every market
will all burst, much to everyone's dismay.
We can add a
fourth dynamic
of bubbles:
Nobody believes bubbles
can burst until it's too late to get out unscathed.
Agree with respect to points 1 and 2 but is at least Kotkin's is a bit more insightful
than the recent Markovits book on meritocracy. In the latter, Markovits divides the entire
country into middle class and elites, with the owners and Kotkin's clerisy combined and
subject to the same structure, rewards and stresses.
Never a mention of capital or ownership of the means of production. Guess one should not
be shocked that a Yale professor considers himself elite, but a little surprising that he
does not understand that he serves at the pleasure of the owners. That's a club and he's not
in it as the comic-laureate Carlin would say. A little class consciousness goes a long
way.
This is the conflict between financial elite and Silicon Valley modules against traditional manufactures and extractive
industries like oil, gas, coil, iron ore, etc.
Notable quotes:
"... The First Estate, once the province of the Catholic Church, has morphed into what Samuel Coleridge in the 1830s called "the Clerisy," a group that extends beyond organized religion to the universities, media, cultural tastemakers and upper echelons of the bureaucracy. The role of the Second Estate is now being played by a rising Oligarchy, notably in tech but also Wall Street, that is consolidating control of most of the economy. ..."
A recent
OECD report , is under assault, and shrinking in most places while prospects for upward
mobility for the working class also declines.T
he anger of the Third Estate, both the growing property-less Serf class as well as the
beleaguered Yeomanry, has produced the growth of populist, parties both right and left in
Europe, and the election of Donald Trump in 2016. In the U.S., this includes not simply the
gradual, and sometimes jarring, transformation of the GOP into a vehicle for populist rage, but
also the rise on the Democratic side of politicians such as Sens. Bernie Sanders and Elizabeth
Warren, each of whom have made class politics their signature issue.
Today's neo-feudalism recalls the social order that existed before the democratic
revolutions of the 17th and 18th Century, with our two ascendant estates filling the roles of
the former dominant classes.
The First Estate, once the province of the Catholic Church, has
morphed into what Samuel Coleridge in the 1830s called "the Clerisy," a group that extends
beyond organized religion to the universities, media, cultural tastemakers and upper echelons
of the bureaucracy. The role of the Second Estate is now being played by a rising Oligarchy,
notably in tech but also Wall Street, that is consolidating control of most of the economy.
Together these two classes have waxed while the Third Estate has declined. This essentially
reversed the
enormous gains made by the middle and even the working class over the past 50 years. The
top 1% in America captured just 4.9 percent of total U.S. income growth in 1945-1973, but since
then the country's richest classes has gobbled up an astonishing 58.7% of all new wealth in the
U.S., and 41.8 percent of total income growth during 2009-2015 alone.
In this period, the Oligarchy has benefited from the financialization of the economy and the
refusal of the political class in both parties to maintain competitive markets. As a result,
American industry has become increasingly concentrated. For example, the five largest banks now account
for close to 50 percent of all banking assets, up from barely 30 percent just 20 years ago.
(RELATED: The
Biggest Bank You've Never Heard Of)
Warren Buffett, Jeffrey Immelt, Charles Schwab and Jamie Dimon, at Georgetown University.
Chip Somodevilla/Getty Images.
The concentration numbers in tech are even more frightening. Once a highly competitive
industry, it is now among the most concentrated
. Like the barbarian chieftains who seized land after the fall of Rome, a handful of companies
-- Facebook , Google
, Apple, Microsoft
and
Amazon -- have gained total control over a host of markets, from social media to search,
the software operating systems, cloud computing and e-commerce. In many key markets such as
search, these companies enjoy market shares reaching to eighty or ninety percent.
As they push into fields such as entertainment, space travel, finance and autonomous
vehicles, they have become, as technology analyst
Izabella Kaminska notes, the modern-day "free market" equivalents of the Soviet planners
who operated Gosplan, allocating billions for their own subjective priorities. Libertarians
might point out that these tech giants are still privately held firms but they actually
represent
, as one analyst put it, "a new form of monopoly power made possible by the 'network effect' of
those platforms through which everyone must pass to conduct the business of life."
The role of the Clerisy
The new feudalism, like the original, is not based simply around the force of arms, or in
this case what Marx called "the cash nexus." Like the church in Medieval times, the Clerisy
sees itself as anointed to direct human society, a modern version of what historian Marc Bloch
called the "oligarchy of priests and monks whose task it was to propitiate heaven." This
modern-day version of the old First Estate sets down the ideological tone in the schools, the
mass media, culture and the arts. There's also a Clerisy of sorts on the right, and what's left
of the center, but this remains largely, except for Fox, an insignificant remnant.
Like their predecessors, today's Clerisy embraces an orthodoxy, albeit secular, on a host of
issues from race and gender to the environment. Universities have become increasingly dogmatic
in their worldview.
One study of 51 top colleges found the proportion of liberals to conservatives as much as
70:1, and usually at least 8:1. At elite liberal arts schools like Wellesley, Swarthmore and
Williams, the proportion reaches 120:1.
The increasing concentration of media in ever
fewer centers -- London, New York, Washington, San Francisco -- and the decline of the
local press has accentuated the elite Clerisy's domination. With most reporters well on the
left, journalism, as a 2019 Rand report reveals, is
steadily moving from a fact-based model to one that is dominated by predictable opinion. This,
Rand suggests has led to what they called "truth decay."
The new geography of feudalism
The new feudalism increasingly defines geography not only in America but across much of the
world. The great bastion of both the Oligarchy and high reaches of the Clerisy lies in the
great cities, notably New York, London, Paris, Beijing, Shanghai, Tokyo, San Francisco, Los
Angeles and Seattle. These are all among the most expensive places to live in the world and
play a dominant role in the global media.
Yet these cities are not the progressive, egalitarian places evoked by great urbanists like
the late Jane Jacobs, but more closely resemble the "gated" cities of the Middle Ages, and
their equivalents in places as diverse as China and Japan. American cities now have higher
levels of inequality, notes one recent study , than Mexico.
In fact, the
largest gaps( between the bottom and top quintiles of median incomes are in the
heartland of progressive opinion, such as in the metropolitan areas of San Francisco, New York,
San Jose, and Los Angeles. (RELATED: Got Income
Inequality? Least Affordable Cities Are Also the Bluest)
In some of the most favored blue cities, such as Seattle ,
Portland and San Francisco , not
only is the middle class disappearing, but there has been something equivalent of "ethnic
cleansing" amidst rising high levels of inequality, homelessness and social disorder.
Long-standing minority communities like the Albina neighborhood in
Portland are disappearing as 10,000 of the 38,000 residents have been pushed out of the
historic African-American section. In San Francisco, the black population has dropped from 18%
in the 1970s to single digits and what remains, notes Harry Alford ,
National Black Chamber of Commerce president, "are predominantly living under the poverty level
and is being pushed out to extinction."
This exclusive and exclusionary urbanity contrasts with the historic role of cities. The
initial rise of the Third Estate was tied intimately to the " freedom of the city . " But with
the diminishing prospects for blue-collar industries, as well as high housing costs, many
minorities and immigrants are increasingly migrating away from
multi-culturally correct regions like
Chicago , New York, Los Angeles and San Francisco for less regulated, generally less "woke"
places like Phoenix, Dallas-Ft. Worth, Houston, Atlanta and Las
Vegas.
Yet even as the middle-class populations flee, poverty remains deeply entrenched in our big
cities, with a rate roughly twice that of the suburbs. The much-celebrated urban renaissance
has been largely enjoyed by the upper echelons but not the working classes.
In the city of Philadelphia , for example, the "center city" income rose, but citywide
between 2000 and 2014, for every district that, like downtown, gained in income, two suffered
income declines. Similarly, research shows
that the number of high poverty (greater than 30 percent below the poverty line) neighborhoods
in the U.S. has tripled since 1970 from 1,100 to 3,100.
Undermining the Third Estate
The impact of the rising Clerisy and Oligarchs poses a direct threat to the future of the
Third Estate. On the economic side, relentless consolidation and financialization has
devastated Main Street. In the great boom of the 1980s, small firms and start-ups powered the
economy, but more recently the
rates of entrepreneurship have dropped as mega-mergers, chains and on-line giants slowly
reduced the scope of opportunities. Perhaps most disturbing of all has been the decline in new
formations among younger people.
This phenomenon is most evident in the tech world. Today is not a great time to start a tech
company unless you are in the charmed circle of elite firms with access to venture and private
equity funds. The old garage start-up culture of Silicon Valley is slowly dying, as large firms
gobble up or crush competitors. Indeed, since the rise of the tech economy in the 1990s, the
overall degree of industry
concentration has grown by 75 percent.
Like the peasant farmer or artisan in the feudal era, the entrepreneur not embraced by the
big venture firms lives largely at the sufferance of the tech overlords. As one online
publisher notes on his firm's status with Google:
If you're a Star Trek fan, you'll understand the analogy. It's a bit like being
assimilated by the Borg. You get cool new powers. But having been assimilated, if your
implants were ever removed, you'd certainly die. That basically captures our relationship to
Google.
The Clerisy's War on the Middle Class
For generations, the Clerisy has steadfastly opposed the growth of suburbia, driven in large
part by the aesthetic concerns –the conviction that single-family homes are fundamentally
anti-social– and, increasingly, by often dubious assertions on their environmental
toxicity. In places like California, the United Kingdom, Australia and Canada, government
policies discourage peripheral construction where home ownership rates tend to be higher, in
favor of dense, largely rental housing.
This marks a dramatic turnaround. During the middle of the 20th Century, ownership rates in
the United States leaped from 44 percent in 1940 to 63 percent in the late 1970s. Yet in the
new generation this prospect is fading. In the United States, home ownership among post-college
millennials (aged 25-34) has dropped from 45.4 percent in 2000 to 37.0 percent in 2016, a drop
of 18 percent from the 1970s, according to
Census Bureau data . In contrast, their parents and grandparents witnessed a dramatic rise
of homeownership from 44 percent in 1940 to 63 percent 30 years later.
But the Clerisy's war on middle- and working-class aspiration goes well beyond housing.
Climate change policies already enacted in California
and Germany
have driven millions into "energy poverty." If adopted, many of the latest proposals for such
things as the Green New Deal all but guarantee the
rapid reduction of millions of highly productive and often well-paying energy, aerospace,
automobile and logistics jobs.
Political implications
The war of the Estates is likely to shape our political landscape for decades to come. Parts
of the Third Estate –those working with their hands or operating small businesses–
increasingly flock to the GOP, according to a recent CityLab report. Trump also has a case to make with these workers, as real wages
for
blue-collar workers are now rising for the first time in decades. Unemployment is near
record lows not only for whites but also Latinos and African-Americans. Of course, if the
economy weakens, he may lose some of this support. (RELATED: Trump Blasts Media For
'Barely' Covering 'Great' Economy, Low Unemployment)
But the emergence of neo-feudalism also lays the foundation for a larger, more potent and
radicalized left. As opportunities for upward mobility shrink, a new generation, indoctrinated
in leftist ideology sometimes from grade school and ever more predictably in undergraduate and
graduate school, tilts heavily to the left, embracing what is essentially an updated socialist
program of massive redistribution, central direction of the economy and racial
redress.
Antifa members in Berkeley, California. AFP/Getty/Amy Osborne.
In France's most recent presidential election, the
former Trotskyite Jean-Luc Melenchon won the under-24 vote, beating the "youthful" Emmanuel
Macron by almost two to one. Similarly in the United Kingdom, the birthplace of modern
capitalism, the
Labour Party , under the neo-
Marxist Jeremy Corbyn , won over 60 percent of the vote among voters under 40, compared to
just 23 percent for the Conservatives. Similar trends can be seen across Europe, where the Red
and
Green Party enjoys wide youth support.
The shift to hard-left politics also extends to the United States– historically not a
fertile area for Marxist thinking. In
the 2016 primaries , the openly socialist
Bernie Sanders easily outpolled Hillary Clinton and Donald Trump combined. A 2016 poll by
the Communism Memorial
Foundation found that 44 percent of American millennials favored socialism while another 14
percent chose fascism or communism. By 2024,
these millennials will be by far
the country's biggest voting bloc .
In the current run-up to the Democratic nomination these young voters
overwhelming tilt toward Sanders and his slightly less radical colleague Warren, while former
Vice President Joe Biden retains the support of older Democrats. The common themes of the "new"
Left, with such things as guaranteed annual incomes, rent control, housing subsidies, and free
college might prove irresistible to a generation that has little hope of owning a home, could
remain childless, and might never earn enough money to invest in much of anything. (RELATED: Bernie Sanders Says 'Health Care For All' Will Require Tax Increases)
At the end, the war of the estates raises the prospect of rising autocracy, even under
formally democratic forms. In his assessment in "Democracy in America ," Alexis de
Tocqueville suggests a new form of tyranny -- in many ways more insidious than that of the
monarchical state -- that grants favors and entertainments to its citizens but expects little
in obligation. Rather than expect people to become adults, he warns, a democratic state can be
used to keep its members in "perpetual childhood" and "would degrade men rather than tormenting
them."
With the erosion of the middle class, and with it dreams of upward mobility, we already see
more extreme, less liberally minded class politics. A nation of clerics, billionaires and serfs
is not conducive to the democratic experiment; only by mobilizing the Third Estate can we hope
that our republican institutions will survive intact even in the near future.
Mr. Kotkin is the Presidential Fellow in Urban Futures at Chapman University and the
executive director of the Center for Opportunity Urbanism. His next book, "The Coming Of
Neo-Feudalism," will be out this spring.
The views and opinions expressed in this commentary are those of the author and do not
reflect the official position of the Daily Caller.
"... Instead of submitting a general application, as used to be the case in the past, and have the ability to work with the company to find the role that works best. HR has ruined a lot of good companies and their recruiting processes by going to rigid job descriptions instead of just hiring smart people and letting them work. ..."
The Economic Cycle Research Institute's
(ECRI) Lakshman Achuthan recently sat down with CNBC's
Michael Santoli to discuss the jobs growth downturn. Keep in mind, this conversation was held on
Wednesday, several days before Friday's
disappointing
jobs report.
Achuthan told Santoli there's a "
very clear cyclical downturn
in jobs growth, there's really no debating that, and it looks set to continue
."
Achuthan said January 2019 marked the cyclical peak in jobs growth, has been moving lower ever
since, and the trend is far from over.
Both nonfarm payrolls and the household survey
year-over-year growth are in cyclical downturns,
he said.
While the economic narratives via the mainstream financial press continue to cheerlead that the
consumer will lift all tides thanks to the supposedly strong jobs market, Achuthan believes the
downturn in jobs growth will start to "undermine consumer confidence." And it's the loss in consumer
confidence that could tilt the economy into recession.
He also said when examining cyclically
sensitive sectors of the economy, there are already "questionable jobs numbers," such as a significant
surge in the construction unemployment rate.
Achuthan said nonfarm payroll growth has plunged to a 17-month low, and the household survey is
even weaker. He said the top nonfarm payroll line would be revised down by half a million jobs in the
coming months, which would underline the weakness in employment.
Achuthan emphasized to Santoli that
ECRI's recession call won't be "taken off the table.
We've been talking
about a growth rate cycle slowdown.
We're slow-walking toward -- some recessionary window of vulnerability
-- we're
not there today -- but this piece of the puzzle [jobs growth downturn] is looking a bit wobbly. This is the main message that Wall
Street is missing."
As Wall Street bids stocks to near-record highs on "trade optimism" and the belief that the consumer
will save the day, in large part because of solid jobs growth.
ECRI's Leading Employment
Index, which correctly anticipated this downturn in jobs growth, is at its worst reading since the
Great Recession
.
And Wall Street's bet today is that the Fed can achieve a soft landing –
as in 1995-96 – when it started the rate cut cycle the same month the inflation downturn was signaled
by the U.S. Future Inflation Gauge (USFIG) turning lower.
And now it should become increasingly clear to readers why President Trump has sounded the alarm about the need for 100bps rate
cuts, quantitative easing, and emergency payroll tax cuts - it's because he's been briefed about the economic downturn that has
already started.
I don't agree with him that the Fed can do anything to correct this,
nor do they have an incentive to do so. The Fed is not on the
consumer's side. They will appropriate funds to whoever they want to,
just like 08, and give the middle finger to everyone else.
Job quality is horrible, particularly for US citizen STEM workers.
This has been the case since the downturn that began in the late
1990s. Trump needs to fully cancel the OPT program and almost
eliminate the H-1B program. Major employers don't even bother
considering US citizen STEM talent before they hire foreign
nationals.
Yes, but they don't bother to come out and tell you its a fake ad. One of the tragedies of the online job application process is that it forces a person, with little to no knowledge of a company and its internals, to pick, out of potentially hundreds of roles, which one would be best for them.
Instead of submitting a general application, as used to be the case in the past, and have the ability to work with the company to find the role that works best. HR has ruined a lot of good companies and their recruiting processes by going to rigid job descriptions instead of just hiring smart people and letting them work.
"... The probability that a recession will come soon -- or be severe when it does -- depends in part on the state of ever-changing popular narratives about the economy. These are stories that provide a framework for piecing together the seemingly random bits of information that one picks up from friends, the news or social media. ..."
"... The last recession 10 years ago was exceptionally severe, and it is worth examining closely for insights into how the spread of economic narratives drove human behavior. ..."
"... It now appears that while Sept. 15, 2008, was a logical moment for the start of a panic, that's not really what happened. That was when Lehman Brothers, an old-line investment bank, failed, and while this was a major economic event, the evidence suggests that it did not foster a viral narrative among the broad population. ..."
"... Since Lehman was an investment bank, and did not accept deposits from small savers, most people weren't much moved by its demise. Instead, the big change seems to have come on Sept. 25, 2008. That was when the government seized Washington Mutual -- a giant savings and loan association, known as WaMu, that had suffered a sudden mass exodus of depositors -- and sold its assets to JPMorgan Chase for $1.9 billion. ..."
"... Roosevelt's memorable words, "The only thing we have to fear is fear itself," became, in Mr. Bush's Rose Garden speech, "Anxiety can feed anxiety." The New York Times noted that parallel then. It seemed to many people, in real time, that the Great Depression might be repeating itself. ..."
"... Even before Mr. Bush's speech, Great Depression narratives had been emerging strongly. For example, the number of articles in the ProQuest News & Newspapers database containing the words "Great Depression" rose fivefold from 2007 to 2008. The term, with its emotional resonance, had exploded into an epidemic. ..."
"... But the Great Depression narrative is still alive, though it does not dominate at the moment. President Trump's exuberant speeches, if one believes them, still encourage big spending and confidence. Yet older, troubling narratives are waiting to become viral again. ..."
"... New crises that shake up the economy often surprise economists because no exogenous cause appears to be a sufficient explanation for a downturn. People begin to suddenly frame current events in the context of stories they had heard many times before. ..."
"... This may seem puzzling until we realize that an old narrative has renewed itself in an epidemic, and people have begun to respond reflexively in their day-to-day decisions. If enough people begin to act fearfully, their anxiety can become self-fulfilling, and a recession, sometimes a big one, may follow. ..."
What People Say About the Economy Can Set Off a Recession
By Robert J. Shiller
When will the next recession arrive?
Economists are evaluating such factors as President Trump's endlessly shifting tariff
policy, the monetary policy of the Federal Reserve and other central banks, and such "leading
indicators" as the yields in the bond market.
It is good to look at these things. They provide insights about the state of the markets
and the economy, but they have severe limitations as forecasting tools. This approach will
not produce a definitive advance reading of a major shift from growth to contraction: a
recession.
Forecasting such a shift is extremely difficult. But if we are to have a chance at
success, it is critical to insert into the discussion another factor entirely: an examination
of the popular narratives that may be infecting individual economic decision-making.
The probability that a recession will come soon -- or be severe when it does -- depends in
part on the state of ever-changing popular narratives about the economy. These are stories
that provide a framework for piecing together the seemingly random bits of information that
one picks up from friends, the news or social media.
For consumers these narratives affect decisions on whether to spend or save, whether to
take a demanding or an easy job, whether to take a risk or stick with something safer. For
businesspeople the prevailing narratives affect deliberations on whether to hire more help or
lay off employees, whether to expand or retrench or even start a new enterprise.
For most people, such important decisions are fraught with ambiguity and uncertainty.
Hardly any of us have precise formulas to decide our plans. So we allow ourselves to be
influenced by the emotions, theories and scripts suggested in the stories we hear from
others.
Fortunately, the widespread digitization of text, combined with enhanced capabilities for
natural-language processing, is beginning to give us new insights into the history of
economic narratives. We are beginning to develop a new economics, one that studies these
changing economic stories and metaphors systematically.
In my new book, I describe narratives that can periodically surge into epidemics and are
capable of changing the economy's direction or of turning small booms and recessions into big
ones.
These narratives cluster around several issues:
■ Public confidence or the lack of it.
■ Social norms regarding extravagance or modesty in consumption.
■ The rise or fall of monetary standards of value.
■ The replacement of manual workers by machines.
■ The threat of artificial intelligence to all human labor.
■ Real estate booms and busts.
■ Stock market bubbles.
■ Profiteering by big business.
■ Wage-price spirals that are pinned on labor unions.
Changes in the current environment may cause a subtle mutation in these perennial stories,
causing them to go viral and sometimes increasing their contagious effects or extending the
period in which they expand. Much as epidemiologists study infectious diseases, we economists
can study the spread and transformation of these powerful stories.
The last recession 10 years ago was exceptionally severe, and it is worth examining
closely for insights into how the spread of economic narratives drove human behavior.
It now appears that while Sept. 15, 2008, was a logical moment for the start of a panic,
that's not really what happened. That was when Lehman Brothers, an old-line investment bank,
failed, and while this was a major economic event, the evidence suggests that it did not
foster a viral narrative among the broad population.
Since Lehman was an investment bank, and did not accept deposits from small savers, most
people weren't much moved by its demise. Instead, the big change seems to have come on Sept.
25, 2008. That was when the government seized Washington Mutual -- a giant savings and loan
association, known as WaMu, that had suffered a sudden mass exodus of depositors -- and sold
its assets to JPMorgan Chase for $1.9 billion.
That event was often seen to resemble the Great Depression and the collapse of the banking
system in 1933. People feared the possibility of spreading bank failures and therefore of
personal tragedies.
The public was transfixed when President George W. Bush spoke from the White House Rose
Garden on Oct. 10, 2008, about the risk of a serious economic downturn.
While Mr. Bush did not utter the word "depression," he used language that closely
resembled that of the first inaugural address of President Franklin D. Roosevelt in 1933,
perhaps the worst time of the Great Depression.
Roosevelt's memorable words, "The only thing we have to fear is fear itself," became, in
Mr. Bush's Rose Garden speech, "Anxiety can feed anxiety." The New York Times noted that
parallel then. It seemed to many people, in real time, that the Great Depression might be
repeating itself.
Even before Mr. Bush's speech, Great Depression narratives had been emerging strongly. For
example, the number of articles in the ProQuest News & Newspapers database containing the
words "Great Depression" rose fivefold from 2007 to 2008. The term, with its emotional
resonance, had exploded into an epidemic.
In contrast, other big historical events, like the panic of 1907, have been almost totally
forgotten by the public and are unlikely to develop into a big new epidemic.
But the Great Depression narrative is still alive, though it does not dominate at the
moment. President Trump's exuberant speeches, if one believes them, still encourage big
spending and confidence. Yet older, troubling narratives are waiting to become viral
again.
New crises that shake up the economy often surprise economists because no exogenous cause
appears to be a sufficient explanation for a downturn. People begin to suddenly frame current
events in the context of stories they had heard many times before.
This may seem puzzling until we realize that an old narrative has renewed itself in an
epidemic, and people have begun to respond reflexively in their day-to-day decisions. If
enough people begin to act fearfully, their anxiety can become self-fulfilling, and a
recession, sometimes a big one, may follow.
Robert J. Shiller is Sterling Professor of Economics at Yale.
Thomas Piketty's New Book Brings Political Economy Back to Its Sources
In the same way that Capital in the Twenty-First Century transformed the way economists look
at inequality, Piketty's new book Capital and Ideology will transform the way political
scientists look at their own field.
By Branko Milanovic
Thomas Piketty's books are always monumental. Some are more monumental than others. His
Top Incomes in France in the Twentieth Century: Inequality and Redistribution,
1901–1998 (published in French as Les hauts revenus en France au XXe siècle)
covered more than two centuries of income and wealth inequality, in addition to social and
political changes in France. His international bestseller Capital in the Twenty-First Century
(Le capital au XXI siècle) broadened this approach to the most important Western
countries (France, the United States, United Kingdom, and Germany). His new book Capital and
Ideology (to be published in English in March 2020; already published in France as Capital et
idéologie) broadens the scope even further, covering the entire world and presenting a
historical panorama of how ownership of assets (including people) was treated, and justified,
in various historical societies, from China, Japan, and India, to the European-ruled American
colonies, and feudal and capitalist societies in Europe. Just the mention of the geographical
and temporal scope of the book suffices to give the reader an idea of its ambition.
Before I review Capital and Ideology, it is worth mentioning the importance of Piketty's
overall approach, present in all three of his books. His approach is characterized by the
methodological return of economics to its original and key functions: to be a science that
illuminates the interests and explains the behaviors of individuals and social classes in
their quotidian (material) life. This methodology rejects the dominant paradigm of the past
half-century, which increasingly ignored the role of classes and heterogeneous individuals in
the process of production and instead treated all people as abstract agents that maximize
their own income under certain constraints. The dominant paradigm has emptied almost all
social content from economics and presented a view of society that was as abstract as it was
false.
The reintroduction of actual life into economics by Piketty and several other economists
(not entirely coincidentally, most of them are economists interested in inequality) is much
more than just a return to the sources of political economy and economics. This is because
today, we have vastly more information (data) than was available to economists a century ago,
not only about our own contemporary societies but also about past societies. This combination
between political economy's original methodology and big data is what I call "turbo-Annales,"
after the French group of historians that pioneered the view of history as a social science
focusing on the broad social, economic, and political forces that shape the world. The topics
that interested classical political economy and the authors associated with the Annales
School can now be studied empirically, and even econometrically and experimentally -- things
which they could not do, both because of the scarcity of data and unavailability of modern
methodologies.
It is within this context that, I believe, we ought to consider Piketty's Capital and
Ideology. How successful was his approach, applied now to the world and over a very long
time-horizon?
"The dominant paradigm has emptied almost all social content from economics and presented
a view of society that was as abstract as it was false."
For the purposes of this review, I divide Piketty's book into two parts: the first, which
I already mentioned, looks at ideological justifications of inequality across different
societies (Parts 1 and 2 of the book, and to some extent Part 3); the second introduces an
entirely new way of studying recent political cleavages in modern societies (Part 4). I am
somewhat skeptical about Piketty's success in the first part, despite his enormous erudition
and his skills as a raconteur, because success in discussing something so geographically and
temporally immense is difficult to reach, even by the best-informed minds who have studied
different societies for the majority of their careers. Analyzing each of these societies
requires an extraordinarily high degree of sophisticated historical knowledge regarding
religious dogmas, political organization, social stratification, and the like. To take two
examples of authors who have tried to do it, one older and one more recent: Max Weber, during
his entire life (and more specifically in Economy and Society), and Francis Fukuyama in his
two-volume masterpiece on the origins of the political and economic order. In both cases, the
results were not always unanimously approved by specialists studying individual societies and
religions.
In his analysis of some of these societies, Piketty had to rely on somewhat
"straightforward" or simplified discussions of their structure and evolution, discussions
which at times seem plausible but superficial. In other words, each of these historical
societies, many of which lasted centuries, had gone through different phases in their
developments, phases which are subject to various interpretations. Treating such evolutions
as if they were a simple, uncontested story is reductionist. It is a choice of one plausible
historical narrative where many exist. This compares unfavorably with Piketty's own rich and
nuanced narrative in Top Incomes in France in the Twentieth Century.
While I am somewhat skeptical about that first part of the book, I am not skeptical about
the second. In this part, we find the Piketty who plays to his strength: bold and innovative
use of data which produces a new way of looking at phenomena that we all observe but were
unable to define so precisely. Here, Piketty is "playing" on the familiar Western economic
history "terrain" that he knows well, probably better than any other economist.
This part of the book looks empirically at the reasons that left-wing, or social
democratic parties have gradually transformed themselves from being the parties of the
less-educated and poorer classes to become the parties of the educated and affluent middle
and upper-middle classes. To a large extent, traditionally left parties have changed because
their original social-democratic agenda was so successful in opening up education and
high-income possibilities to the people who in the 1950s and 1960s came from modest
backgrounds. These people, the "winners" of social democracy, continued voting for left-wing
parties but their interests and worldview were no longer the same as that of their
(less-educated) parents. The parties' internal social structure thus changed -- the product
of their own political and social success. In Piketty's terms, they became the parties of the
"Brahmin left" (La gauche Brahmane), as opposed to the conservative right-wing parties, which
remained the parties of the "merchant right" (La droite marchande).
To simplify, the elite became divided between the educated "Brahmins" and the more
commercially-minded "investors," or capitalists. This development, however, left the people
who failed to experience upward educational and income mobility unrepresented, and those
people are the ones that feed the current "populist" wave. Quite extraordinarily, Piketty
shows the education and income shifts of left-wing parties' voters using very similar
long-term data from all major developed democracies (and India). The fact that the story is
so consistent across countries lends an almost uncanny plausibility to his hypothesis.
It is also striking, at least to me, that such multi-year, multi-country data were
apparently never used by political scientists to study this phenomenon. This part of
Piketty's book will likely transform, or at least affect, how political scientists look at
new political realignments and class politics in advanced democracies in the years to come.
In the same way that Capital in the Twenty-First Century has transformed how economists look
at inequality, Capital and Ideology will transform the way political scientists look at their
own field.
Branko Milanovic is a senior scholar at the Stone Center on Socio-Economic Inequality at the
Graduate Center, City University of New York.
Should We Worry About Income Gaps Within or Between Countries?
The rise of populist nationalism throughout the West has been fueled partly by a clash between the objectives of equity in rich
countries and higher living standards in poor countries. Yet advanced-economy policies that emphasize domestic equity need not
be harmful to the global poor, even in international trade.
By DANI RODRIK
At the beginning of classes every autumn, I tease my students with the following question: Is it better to be poor in a rich
country or rich in a poor country? The question typically invites considerable and inconclusive debate. But we can devise a more
structured and limited version of the question, for which there is a definitive answer.
Let's narrow the focus to incomes and assume that people care only about their own consumption levels (disregarding inequality
and other social conditions). "Rich" and "poor" are those in the top and bottom 5 percent of the income distribution, respectively.
In a typical rich country, the poorest 5 percent of the population receive around 1 percent of the national income. Data are a
lot sparser for poor countries, but it would not be too much off the mark to assume that the richest 5 percent there receive 25
percent of the national income.
Similarly, let's assume that rich and poor countries are those in the top and bottom 5 percent of all countries, ranked by
per capita income. In a typical poor country (such as Liberia or Niger), that is around 1,000 U.S. dollars, compared to 65,000
U.S. dollars in a typical rich country (say, Switzerland or Norway). (These incomes are adjusted for cost-of-living, or purchasing-power,
differentials so that they can be directly compared.)
Now, we can calculate that a rich person in a poor country has an income of 5,000 (1,000 x 0.25 x 20) U.S. dollars while a
poor person in a rich country earns 13,000 (65,000 x 0.01 x 20) U.S. dollars. Measured by material living standards, a poor person
in a rich country is more than twice as well off as a rich person in a poor country.
This result surprises my students, most of whom expect the reverse to be true. When they think of wealthy individuals in poor
countries, they imagine tycoons living in mansions with a retinue of servants and a fleet of expensive cars. But while such individuals
certainly exist, a representative of the top 5 percent in very poor countries is likely to be a mid-level government bureaucrat.
The larger point of this comparison is to underscore the importance of income differences across countries, relative to inequalities
within countries.
At the dawn of modern economic growth, before the Industrial Revolution, global inequality derived almost exclusively from
inequality within countries. Income gaps between Europe and poorer parts of the world were small. But as the West developed in
the 19th century, world economy underwent a "great divergence" between the industrial core and the primary-goods-producing periphery.
During much of the postwar period, income gaps between rich and poor countries accounted for the greater part of global inequality.
From the late 1980s onward, two trends began to alter this picture. First, led by China, many parts of the lagging regions
began to experience substantially faster economic growth than the world's rich countries. For the first time in history, the typical
developing-country resident was getting richer at a faster pace than his or her counterparts in Europe and North America.
Second, inequalities began to increase in many advanced economies, especially those with less-regulated labor markets and weak
social protections. The rise in inequality in the United States has been so sharp that it is no longer clear that the standard
of living of the American "poor" is higher than that of the "rich" in the poorest countries (with rich and poor defined as above).
These two trends went in offsetting directions in terms of overall global inequality – one decreased it while the other increased
it. But they have both raised the share of within-country inequality in the total, reversing an uninterrupted trend observed since
the 19th century.
Given patchy data, we cannot be certain about the respective shares of within- and between-country inequality in today's world
economy. But in an unpublished paper based on data from the World Inequality Database, Lucas Chancel of the Paris School of Economics
estimates that as much as three-quarters of current global inequality may be due to within-country inequality. Historical estimates
by two other French economists, François Bourguignon and Christian Morrison, suggest that within-country inequality has not loomed
so large since the late 19th century.
These estimates, if correct, suggest that the world economy has crossed an important threshold, requiring us to revisit policy
priorities. For a long time, economists like me have been telling the world that the most effective way to reduce global income
disparities would be to accelerate economic growth in low-income countries. Cosmopolitans in rich countries – typically the wealthy
and skilled professionals – could claim to hold the high moral ground when they downplayed the concerns of those complaining about
domestic inequality.
But the rise of populist nationalism throughout the West has been fueled partly by the tension between the objectives of equity
in rich countries and higher living standards in poor countries. Advanced economies' increased trade with low-income countries
has contributed to domestic wage inequality. And probably the single best way to raise incomes in the rest of the world would
be to allow a massive influx of workers from poor countries into rich countries' labor markets. That would not be good news for
less educated, lower-paid rich-country workers.
Yet advanced-economy policies that emphasize domestic equity need not be harmful to the global poor, even in international
trade. Economic policies that lift incomes at the bottom of the labor market and diminish economic insecurity are good both for
domestic equity and for the maintenance of a healthy world economy that provides poor economies a chance to develop.
Dani Rodrik is Professor of International Political Economy at Harvard University's John F. Kennedy School of Government.
Trade and income distribution are related but the relationship can be determinative lay shaped by domestic institutions and country
wide foreign trade policy
We need institutions run by and for common workng people
And foreign trade policy to shape impact patterns on domestic households in a pro common working people pattern
Too many well meaning Cosmo humanists assume the corporate message to be binding
A r
Trade off between foreign poor and domestic wage earners
Was part of global progress
Nope
Not necessarily so
Dani has several popularly written papers on tis point
Dani Rodrik is wrong. The idea that poor in the USA live better then top 5% in the most poor counties is a kind of persistent
neoliberal myth that needs to dispelled.
1. Purchase party essentially means that in poor countries dollar is overvalued twice or more. Which means that $5K in poorest
countries is close to $10 or even $15K in the USA and other Western countries.
2. Access to education and medical care is incomparable. In the USA most poor live without medical insurance. That put them
in severe disadvantage with top 5% of a poor country.
3. Top 5% in poor countries typically own very comfortable apartments, in many cases far superior to what is available in the
USA even for middle income families. Cost of the rent on two bedroom apartment in the large city in poor countries is typically
5-10 times less then in the USA. Taking into account very low quality of apartment complexes in the USA, the apartments in poor
countries for top 5% might well belong to luxury apartment class in the USA. I know for sure that in the capital of Tajikistan
(2017 GDP per Capita: $777) they are better.
The low 5% in the USA actually live in the third world country with considerable level of segregation from the rest of population
as for apartments in which they live (look housing of the low paid retail and WalMart employees for actual data; their standard
of living is just horrible, especially for single mothers with children)
3. Level of education. Top 5% in poor country are mostly university educated or better. Low 5% in the USA and other Western
countries usually are functionally illiterate.
1. 32 million adults can not read in the United States equal to 14% of the population.
2. 21% of US adults read below the 5th grade level.
3. 19% of high school graduates can not read.
4. 85% of juveniles who interact with the juvenile court system are considered functionally illiterate.
5. 70% of inmates in America's prisons can not read above the fourth grade level.
4. Military industrial complex and Wall Street had taken ordinary Americans for a ride much like in the UK during the days
of British Empire.
Which for one thing means that due to lack of affordable public transportation you need to own a car outside major metropolises.
Which drops you standard of living. You will be fleeced three times: first by used car dealerships, then by insurance companies
(low credit rating and high risk of default means high premium) and then repair shops which in some cases are really criminal
enterprises exploiting the most poor and vulnerable parts of the population. Parts who has no access to quality cars.
Top 5% in poor countries has access to new small and midsize Japanese models (like Corolla, Nissan Juke, etc )
Also Rodrik method of calculation of income of top 5% of population is highly questionable. He never tried to verify his calculation
with actual statistic of distribution of incomes in say top 10 poorest countries in the world (the list includes three the xUSSR
"stans"; for them top 5% earns probably at least $20K a year, if not more )
IMHO for poor countries the income of the top 5% is probably two to four times higher then Rodrick estimate due to extreme
values of GINI coefficient for such countries. Top 5% on such countries are mostly represented by people working for foreign companies
(compradors), high level professionals and high level government employees. For the latter the salary is just the top of the iceberg
of the real income.
Half of Saudi Arabia's oil production has gone offline following a surprise drone strike.
Drones attacked Abqaiq facility in Saudi Arabia and the Khurais oil field run by Saudi Aramco early Saturday morning, the
kingdom's interior ministry
said
,
sparking a massive fire at a crude processing plant essential to global oil supplies.
The closure will impact nearly
5
million barrels of crude processing per day
, affecting 5 percent of the world's daily oil production. And while Aramco is
confident that it can recover quickly, if it can't, however, the world could face a production shortage of as much 150MM
barrels per month. An outcome which could send oil prices into the triple digits.
Houthi rebels-- who are backed by Iran in a yearlong Saudi-led battle in Yemen-- have apparently asserted responsibility for
the strikes and pledged that more assaults can be expected in the future.
A Houthi spokesperson explained, "We promise the Saudi regime that our future operations will expand and be more painful as
long as its aggression and siege continue," adding that the attack involved ten drones.
The Iran-backed Houthis have recently been behind a number of assaults on Saudi pipelines, vessels and other energy
infrastructure as tensions grow in the region.
There have been no details on the severity of the damage but Agence France-Presse quoted interior ministry spokesperson
Mansour al-Turki as saying that there were no human casualties as a result of the attack.
This latest strike highlights the risk posed by the Houthis to Saudi Arabia's
oil
infrastructure
as tensions between the groups continues to escalate.
The growing power of the Houthis' drone operations is likely to reignite the debate on where the militant group is securing
these weapons. It could very well be that the group has weaponized noncombatant drones, or in a darker scenario, they are
receiving the militarized drones from Iran.
A Saudi-led coalition has been at
war
with
the Houthi movement in Yemen since March 2015. The Iranian-backed rebels hold the funding, Sana'a, and other areas in the Arab
world's most impoverished nation.
The battle has created one of the world's worst humanitarian crisis. The violence has pressed Yemeni citizens to the brink of
starvation. And the death toll has soared to more than 90,000 individuals since 2015, according to the US-based Armed Conflict
Location & Event Data Project, which tracks the conflict.
(Bloomberg) -- Middle East geopolitics have come back with a vengeance to hit the oil
market. What everybody feared has happened. An attack has penetrated the defenses of Saudi
Arabia's massive Abqaiq oil processing facility, the heart of the kingdom's oil production and
export infrastructure, causing an unknown amount of damage. Crude prices will react and
emergency stockpiles will be tapped.
Fires at the plant were brought under control within hours, but the flow of crude from Saudi
Arabia, the world's biggest exporter, will almost certainly be affected, although we don't yet
know by how much or for how long. Traders who have shrugged off tensions in the Middle East for
months will respond to this attack when markets open on Monday.
The height of the price spike will depend on how much we know about the extent of the damage
and how long it will take to repair. An absence of information will lead traders to assume the
worst.
The Abqaiq crude processing plant is the single most important facility in the Saudi oil
sector. In 2018 it processed about half of the kingdom's crude oil production, according to a
prospectus published in May for the state oil company's first international bond. That's
roughly 5 million barrels a day, or one in every 20 barrels of oil used worldwide.
Abqaiq is more important to the Saudi oil sector than the kingdom's Persian Gulf export
terminals at Ras Tanura and Ju'aymah, or the Strait of Hormuz that links the Gulf to the Indian
Ocean and the high seas. Crude can be diverted away from the Persian Gulf and Hormuz by pumping
it across the country to the Red Sea through the East-West oil pipeline. But it cannot bypass
Abqaiq. The East-West pipeline starts at Abqaiq and output from the giant Ghawar, Shaybah and
Khurais fields is all processed there, so an attack on the facility will impact crude flows to
export terminals on both coasts.
The latest attack comes just months after drones, allegedly launched from Iraq by Yemen's
Houthi rebels, targeted pumping stations on the oil pipeline. The damage caused by that earlier
attack was minimal, but highlighted the vulnerability of Saudi Arabia's oil infrastructure,
even when located hundreds of miles from the country's borders.
So what happens now?
Saudi Arabia will probably seek to maintain export levels as much as possible by supplying
customers from stockpiles. It holds crude in storage tanks in the kingdom, as well as at sites
in Egypt, Japan and the Netherlands. But it has been running its crude hoard down since the
beginning of 2016 and it is now back at levels not seen since 2008, according to data from the
Joint Organisations Data Initiative. That means the kingdom has much less to draw on than it
did three years ago.
The attack will also test stockpiles in oil-consuming countries. Members of the
International Energy Agency are required to hold 90 days' worth of oil imports in emergency
stocks and those will be pressed into service if the outage at Abqaiq is prolonged. Non-member
countries like China and India have also been building up their own emergency reserves. Those,
too, will be pressed into service.
Neighboring countries who, just days ago, were being exhorted to stick to output quotas
agreed in December will now pump as much as they can to make up for any losses from Saudi
Arabia. The United Arab Emirates, Kuwait and Iraq will all boost output as much as they are
able. But the one country with lots of spare capacity, Iran, won't see any easing of the
restrictions placed on its oil sales by the U.S. Quite the opposite. Its support for the Houthi
rebels in Yemen, who have claimed responsibility for the attack on Abqaiq, will ensure that any
easing of the pressure being exerted on it remains a distant prospect.
To contact the reporter on this story: Julian Lee in London at jlee1627@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at
anightingal1@bloomberg.net, Steve Geimann
Clowns should be increasingly used in redundancy (layoff, firing) meetings until it
becomes the norm and employers start to compete with each other to offer the best clown
redundancy experience and promote it as a benefit.
It would also create clown jobs, which would probably require more clown schools, meaning
that the tuition prices would go through the roof and young people dreaming of becoming
redundancy clowns would either have to come from wealth or take out massive clown loans to
fund their education for clown universities and grad schools. Shareholders can only take so
much top line costs and Wall Street pressure would force corporations to improve return on
investment and reduce redundancy clown labor expenses. Sadly, redundancy clowns would find
themselves training their own replacements – HB1 clowns from "low cost" countries.
Employers would respond to quality criticisms of the HB1 clown experience by publishing
survey results showing very similar almost ex-employee satisfaction with the new clowns.
Eventually, of course, redundancy clowns will be replaced by AI and robots. It's just the
future and we will need to think about how to adapt to it today by putting in place a UBI for
the inevitable redundant redundancy clowns.
Usually a forum for anodyne statements about international cooperation and proper
environmental stewardship, the lid was blown off the latest Arctic Council meeting in May when
Pompeo delivered an unabashedly martial and provocative speech that deserves far more attention
than it got at the time. So let's take a little tour of what may prove a historic proclamation
(in the grimmest sense possible) of a new Washington doctrine for the Far North.
"In its first two decades, the Arctic Council has had the luxury of focusing almost
exclusively on scientific collaboration, on cultural matters, on environmental research," the
secretary of state began mildly. These
were, he said, "all important themes, very important, and we should continue to do those. But
no longer do we have that luxury. We're entering a new age of strategic engagement in the
Arctic, complete with new threats to the Arctic and its real estate, and to all of our
interests in that region."
In what turned out to be an ultra-hardline address, Pompeo claimed that we were now in a new
era in the Arctic. Because climate change -- a phrase Pompeo, of course, never actually uttered
-- is now making it ever more possible to exploit the region's vast resource riches, a scramble
to gain control of them is now officially underway. That competition for resources has
instantly become enmeshed in a growing geopolitical confrontation between the U.S., Russia, and
China, generating new risks of conflict.
On the matter of resource exploitation, Pompeo could hardly contain his enthusiasm.
Referring to the derision that greeted William Seward's purchase of Alaska in 1857, he
declared:
"Far from the barren backcountry that many thought it to be in Seward's time, the
Arctic is at the forefront of opportunity and abundance. It houses 13% of the world's
undiscovered oil, 30% of its undiscovered gas, and an abundance of uranium, rare earth
minerals, gold, diamonds, and millions of square miles of untapped resources."
Of equal attraction, he noted, was the possibility of vastly increasing maritime commerce
through newly de-iced trans-Arctic trade routes that will link the Euro-Atlantic region with
Asia. "Steady reductions in sea ice are opening new passageways and new opportunities for
trade," he enthused. "This could potentially slash the time it takes to travel between Asia and
the West by as much as 20 days Arctic sea lanes could come [to be] the 21st century's Suez and
Panama Canals." That such "steady reductions in sea ice" are the sole consequence of climate
change went unmentioned, but so did another reality of our warming world. If the Arctic one day
truly becomes the northern equivalent of a tropical passageway like the Suez or Panama canals,
that will likely mean that parts of those southerly areas will have become the equivalents of
uninhabitable deserts.
As such new trade and drilling opportunities arise, Pompeo affirmed, the United States
intends to be out front in capitalizing on them. He then began bragging about what the Trump
administration had already accomplished, including promoting expanded oil and gas drilling in
offshore waters and also freeing up "energy exploration in the Arctic National Wildlife Refuge ," a pristine stretch
of northern Alaska
prized by environmentalists as a sanctuary for migrating caribou and other at-risk species.
Additional efforts to exploit the region's vital resources, he promised, are scheduled for the
years ahead.
A New Arena for Competition (and Worse)
Ideally, Pompeo noted placidly, competition for the Arctic's resources will be conducted in
an orderly, peaceful manner. The United States, he assured his listeners, believes in "free and
fair competition, open, by the rule of law." But other countries, he added ominously,
especially China and Russia, won't play by that rulebook much of the time and so must be
subject to careful oversight and, if need be, punitive action.
China, he pointed out, is already developing trade
routes in the Arctic, and establishing economic ties with key nations there. Unlike the United
States (which already has multiple military bases in the Arctic, including one at Thule in
Greenland, and so has a well-established presence there), Pompeo claimed that Beijing is
surreptitiously using such supposedly economic activities for military purposes, including,
heinously enough, spying on U.S. ballistic missile submarines operating in the region, while
intimidating its local partners into acquiescence.
He then cited events in the distant South China Sea, where the Chinese have indeed
militarized a
number of tiny uninhabited islands (outfitting them with airstrips, missile batteries, and the
like) and the U.S. has responded by
sending its warships into adjacent waters. He did so to warn of similar future military
stand-offs and potential clashes in the Arctic. "Let's just ask ourselves, do we want the
Arctic Ocean to transform into a new South China Sea, fraught with militarization and competing
territorial claims?" The answer, he assured his listeners, is "pretty clear." (And I'm sure you
can guess what it is.)
The secretary of state then wielded even stronger language in describing "aggressive Russian
behavior in the Arctic." In recent years, he claimed, the Russians have built hundreds of new
bases in the region, along with new ports and air-defense capabilities. "Russia is already
leaving snow prints in the form of army boots" there, a threat that cannot be ignored. "Just
because the Arctic is a place of wilderness does not mean it should become a place of
lawlessness. It need not be the case. And we stand ready to ensure that it does not become
so."
And here we get to the heart of Pompeo's message: the United States will, of course,
"respond" by enhancing its own military presence in the Arctic to better protect U.S.
interests, while countering Chinese and Russian inroads in the region:
"Under President Trump, we are fortifying America's security and diplomatic presence in the
area. On the security side, partly in response to Russia's destabilizing activities, we are
hosting military exercises, strengthening our force presence, rebuilding our icebreaker fleet,
expanding Coast Guard funding, and creating a new senior military post for Arctic Affairs
inside of our own military."
To emphasize the administration's sincerity, Pompeo touted the largest NATO and U.S. Arctic
military maneuvers since the Cold War era, the recently completed " Trident Juncture " exercise (which he
incorrectly referred to as "Trident Structure"), involving some 50,000 troops. Although the
official scenario
for Trident Juncture spoke of an unidentified "aggressor" force, few observers had any doubt
that the allied team was assembled to repel a hypothetical Russian invasion of Norway, where
the simulated combat took place.
Implementing the Doctrine
And so you have the broad outlines of the new Pompeo Doctrine, centered on the Trump
administration's truly forbidden topic: the climate crisis. In the most pugnacious manner
imaginable, that doctrine posits a future of endless competition and conflict in the Arctic,
growing ever more intense as the planet warms and the ice cap melts. The notion of the U.S.
going nose-to-nose with the Russians and Chinese in the Far North, while exploiting the
region's natural resources, has clearly been circulating in Washington. By August, it had
obviously already become enough of a commonplace in the White House (not to speak of the
National Security Council and the Pentagon), for the president to offer to buy Greenland.
And when it comes to resources and future military conflicts, it wasn't such a zany idea.
After all, Greenland does have abundant natural resources and also houses that U.S. base in
Thule. A relic of the Cold War, the Thule facility, mainly a radar base, is already being
modernized , at a cost of some $300 million, to better track Russian missile launches.
Clearly, key officials in Washington view Greenland as a valuable piece of real estate in the
emerging geopolitical struggle Pompeo laid out, an assessment that clearly wormed its way into
President Trump's consciousness as well.
Iceland and Norway also play key roles in Pompeo's and the Pentagon's new strategic
calculus. Another former Cold War facility, a base at Keflavik in Iceland has been reoccupied
by the Navy and is now being used in antisubmarine warfare missions. Meanwhile, the Marine
Corps has
stationed several hundred combat troops at bases near Trondheim, Norway, the first
permanent deployment of foreign soldiers on Norwegian soil since World War II. In 2018, the
Pentagon even
reactivated the Navy's defunct Second Fleet, investing it with responsibility for
protecting the North Atlantic as well as the Arctic's maritime approaches, including those
abutting Greenland, Iceland, and Norway. Consider these signs of heating-up times.
And all of this is clearly just the beginning of a major buildup in and regular testing of
the ability of the U.S. military to operate in the Far North. As part of Exercise Trident
Juncture, for example, the aircraft carrier Harry S. Truman and its flotilla of
support ships were sent into the Norwegian Sea, the first time a U.S. carrier battle group had
sailed above the Arctic Circle since the Soviet Union imploded in 1991. Similarly,
Secretary of the Navy Richard Spencer recently announced
plans to send surface warships on trans-Arctic missions, another new military move. (U.S.
nuclear submarines make such journeys regularly, sailing beneath the sea ice.) This article first appeared on TomDispatch. More articles by:Michael T. Klare
Amazing; I had no idea Betsy Voss – advocate of for-profit charter schools (privatizing
education) and The New Curriculum – and Eric Prince (advocate for privatizing war) are
brother and sister. Blood will tell.
Profiteering is naked and in the open now in the west, and public systems increasingly
favour the wealthy – if you want better, you should be ready to pay for it. I guess
that's what all those tax cuts were about – shifting a burden off of the wealthy, so
that now public services are pay-as-you-go because the government can't afford to provide
them for everyone. However, tax cuts also favoured the wealthy – gee, it almost makes
you think the class system is coming back, dunnit?
I recall Jeremy Scahill mentioning in his book on Blackwater (before it started changing its
name faster than you can change your socks) that Erik Prince was related to Betsy deVos. This
was long before Scahill turned his own name and reputation into mud when he walked out of a
London conference back in 2012 or 2013 because the Syrian nun Agnes Mariam de la Croix, who
was known to support President Assad at the time, was a guest speaker at the conference.
The "japanification" of America begins. I've stated in this blog more than once that, if
the USA falls, it certainly won't fall like the USSR. The USSR had a very peculiar economic
system, where the PCSU was both the government and the economy: once Gorbachev destroyed his
party, he destroyed the Soviet Union.
The USA, on the other side, is a capitalist economy, which means its "center of command"
is a diffuse web of oligarchic capitalists who govern "in the shadows".
The government of a capitalist society is only one of the many institutions that, in a
diffused fashion, preserves the "market anarchy" (domesticated chaos) that is indispensable
for the existence of capitalism.
America, therefore, is more lika an onion than a jenga tower: if you destroy (peel) one
layer, you still have many more.
Therefore, if the USA collapses, it will probably do so through a gradual descent into
fragmentation and anarchy in a process that will take decades and maybe centuries, in an
analogous form as the Roman Empire in the West.
... ... ...
Today, Sept. 11, is a date that marks two ends:
1) the end of any pretenstions left of a socialist wave in Latin America after the first
one -- Cuba, 1959 -- was successful (so far, the first and only). The CIA masterfully learned
from its mistakes in the island nation and successfully (and brutally) crushed Latin American
socialism;
2) the beginning of the end of the "End of History" era. After the WTC fell, the USA would
begin the invasions of Afghanistan and Iraq, in what would be the last time the USA acted as
the "king of Nations".
What should've been -- after a wonderful victory in Iraq -- turned out to be a Pyrric
endeavor, as Iran successfully resisted, the rest of the ME didn't budge, and the whole thing
turned into a trillionaire black hole that drained the American coffers, spiked its debt
rates and culminated with the 2008 crisis.
Almost 40% -- or some $15 trillion -- of the world's foreign direct investment is "phantom
capital" designed to minimize the tax bills of multinational firms, according to a study
published by the International Monetary Fund.
Such investments -- which are now equivalent to the combined GDP of China and Germany --
have surged about 10 percentage points in the past decade despite targeted global attempts to
curb tax avoidance, an IMF and University of Copenhagen study found. The capital typically
passes through empty corporate shells that have no real business activity.
"FDI is often an important driver for genuine international economic integration,
stimulating growth and job creation and boosting productivity," the report said. But phantom
capital is "financial and tax engineering" that "blurs traditional FDI statistics and makes
it difficult to understand genuine economic integration."
Almost half of the world's phantom capital is hosted by Luxembourg and the Netherlands,
according to the report, with just 10 economies holding more than 85% of such
investments.
"Luxembourg, a country of 600,000 people, hosts as much FDI as the U.S. and much more than
China," the report said. "FDI of this size hardly reflects brick-and-mortar investments in
the minuscule Luxembourg economy," whose $4 trillion in FDI comes to $6.6 million a
person.
"Unsurprisingly," the study found, an economy's exposure to phantom FDI increases with the
corporate tax rate.
This is a Marxist critique of neoliberalism. Not necessary right but they his some relevant
points.
Notable quotes:
"... The ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. ..."
"... The ex ante tendency toward overproduction arises because the vector of real wages across countries does not increase noticeably over time in the world economy, while the vector of labor productivities does, typically resulting in a rise in the share of surplus in world output. ..."
"... While the rise in the vector of labor productivities across countries, a ubiquitous phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an explanation, why does the vector of real wages remain virtually stagnant in the world economy? The answer lies in the sui generis character of contemporary globalization that, for the first time in the history of capitalism, has led to a relocation of activity from the metropolis to third world countries in order to take advantage of the lower wages prevailing in the latter and meet global demand. ..."
"... The current globalization broke with this. The movement of capital from the metropolis to the third world, especially to East, South, and Southeast Asia to relocate plants there and take advantage of their lower wages for meeting global demand, has led to a desegmentation of the world economy, subjecting metropolitan wages to the restraining effect exercised by the third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was marginally lower -- than it had been in 1968. 5 ..."
"... This ever-present opposition becomes decisive within a regime of globalization. As long as finance capital remains national -- that is, nation-based -- and the state is a nation-state, the latter can override this opposition under certain circumstances, such as in the post-Second World War period when capitalism was facing an existential crisis. But when finance capital is globalized, meaning, when it is free to move across country borders while the state remains a nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large fiscal deficits against its wishes, then it would simply leave that country en masse , causing a financial crisis. ..."
"... The state therefore capitulates to the demands of globalized finance capital and eschews direct fiscal intervention for increasing demand. It resorts to monetary policy instead since that operates through wealth holders' decisions, and hence does not undermine their social position. But, precisely for this reason, monetary policy is an ineffective instrument, as was evident in the United States in the aftermath of the 2007–09 crisis when even the pushing of interest rates down to zero scarcely revived activity. 6 ..."
"... If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a beggar-my-neighbor policy, does lead to a significant export of unemployment from the United States, then it will invite retaliation and trigger a trade war that will only worsen the crisis for the world economy as a whole by dampening global investment. Indeed, since the United States has been targeting China in particular, some retaliatory measures have already appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be because the export of unemployment from the United States is insubstantial, keeping unemployment everywhere, including in the United States, as precarious as it is now. However we look at it, the world would henceforth face higher levels of unemployment. ..."
"... The second implication of this dead end is that the era of export-led growth is by and large over for third world economies. The slowing down of world economic growth, together with protectionism in the United States against successful third world exporters, which could even spread to other metropolitan economies, suggests that the strategy of relying on the world market to generate domestic growth has run out of steam. Third world economies, including the ones that have been very successful at exporting, would now have to rely much more on their home market ..."
"... In other words, we shall now have an intensification of the imperialist stranglehold over third world economies, especially those pushed into unsustainable balance-of-payments deficits in the new situation. By imperialism , here we do not mean the imperialism of this or that major power, but the imperialism of international finance capital, with which even domestic big bourgeoisies are integrated, directed against their own working people ..."
"... In short, the ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop and finds fascism. ..."
"... The first is the so-called spontaneous method of capital flight. Any political formation that seeks to take the country out of the neoliberal regime will witness capital flight even before it has been elected to office, bringing the country to a financial crisis and thereby denting its electoral prospects. And if perchance it still gets elected, the outflow will only increase, even before it assumes office. The inevitable difficulties faced by the people may well make the government back down at that stage. The sheer difficulty of transition away from a neoliberal regime could be enough to bring even a government based on the support of workers and peasants to its knees, precisely to save them short-term distress or to avoid losing their support. ..."
"... The third weapon consists in carrying out so-called democratic or parliamentary coups of the sort that Latin America has been experiencing. Coups in the old days were effected through the local armed forces and necessarily meant the imposition of military dictatorships in lieu of civilian, democratically elected governments. Now, taking advantage of the disaffection generated within countries by the hardships caused by capital flight and imposed sanctions, imperialism promotes coups through fascist or fascist-sympathizing middle-class political elements in the name of restoring democracy, which is synonymous with the pursuit of neoliberalism. ..."
"... And if all these measures fail, there is always the possibility of resorting to economic warfare (such as destroying Venezuela's electricity supply), and eventually to military warfare. Venezuela today provides a classic example of what imperialist intervention in a third world country is going to look like in the era of decline of neoliberal capitalism, when revolts are going to characterize such countries more and more. ..."
"... Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing for long. It has no vision for reinventing itself. Interestingly, in the period after the First World War, when capitalism was on the verge of sinking into a crisis, the idea of state intervention as a way of its revival had already been mooted, though its coming into vogue only occurred at the end of the Second World War. 11 Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize itself. And weapons like domestic fascism in the third world and direct imperialist intervention cannot for long save it from the anger of the masses that is building up against it. ..."
The ideology of neoliberal capitalism was the promise of growth.
But with neoliberal capitalism reaching a dead end, this promise disappears and so does this
ideological prop.
Harry Magdoff's The Age of
Imperialism is a classic work that shows how postwar political decolonization does not
negate the phenomenon of imperialism. The book has two distinct aspects. On the one hand, it
follows in V. I. Lenin's footsteps in providing a comprehensive account of how capitalism at
the time operated globally. On the other hand, it raises a question that is less frequently
discussed in Marxist literature -- namely, the need for imperialism. Here, Magdoff not only
highlighted the crucial importance, among other things, of the third world's raw materials for
metropolitan capital, but also refuted the argument that the declining share of raw-material
value in gross manufacturing output somehow reduced this importance, making the simple point
that there can be no manufacturing at all without raw materials. 1
Magdoff's focus was on a period when imperialism was severely resisting economic
decolonization in the third world, with newly independent third world countries taking control
over their own resources. He highlighted the entire armory of weapons used by imperialism. But
he was writing in a period that predated the onset of neoliberalism. Today, we not only have
decades of neoliberalism behind us, but the neoliberal regime itself has reached a dead end.
Contemporary imperialism has to be discussed within this setting.
Globalization and
Economic Crisis
There are two reasons why the regime of neoliberal globalization has run into a dead end.
The first is an ex ante tendency toward global overproduction; the second is that the
only possible counter to this tendency within the regime is the formation of asset-price
bubbles, which cannot be conjured up at will and whose collapse, if they do appear, plunges the
economy back into crisis. In short, to use the words of British economic historian Samuel
Berrick Saul, there are no "markets on tap" for contemporary metropolitan capitalism, such as
had been provided by colonialism prior to the First World War and by state expenditure in the
post-Second World War period of dirigisme . 2
The ex ante tendency toward overproduction arises because the vector of real wages
across countries does not increase noticeably over time in the world economy, while the vector
of labor productivities does, typically resulting in a rise in the share of surplus in world
output. As Paul Baran and Paul Sweezy argued in Monopoly Capital , following the lead of
Michał Kalecki and Josef Steindl, such a rise in the share of economic surplus, or a shift
from wages to surplus, has the effect of reducing aggregate demand since the ratio of
consumption to income is higher on average for wage earners than for those living off the
surplus. 3
Therefore, assuming a given level of investment associated with any period, such a shift would
tend to reduce consumption demand and hence aggregate demand, output, and capacity utilization.
In turn, reduced capacity utilization would lower investment over time, further aggravating the
demand-reducing effect arising from the consumption side.
While the rise in the vector of labor productivities across countries, a ubiquitous
phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an
explanation, why does the vector of real wages remain virtually stagnant in the world economy?
The answer lies in the sui generis character of contemporary globalization that, for the
first time in the history of capitalism, has led to a relocation of activity from the
metropolis to third world countries in order to take advantage of the lower wages prevailing in
the latter and meet global demand.
Historically, while labor has not been, and is still not, free to migrate from the third
world to the metropolis, capital, though juridically free to move from the latter to the
former, did not actually do so , except to sectors like mines and plantations, which
only strengthened, rather than broke, the colonial pattern of the international division of
labor. 4
This segmentation of the world economy meant that wages in the metropolis increased with labor
productivity, unrestrained by the vast labor reserves of the third world, which themselves had
been caused by the displacement of manufactures through the twin processes of
deindustrialization (competition from metropolitan goods) and the drain of surplus (the
siphoning off of a large part of the economic surplus, through taxes on peasants that are no
longer spent on local artisan products but finance gratis primary commodity exports to
the metropolis instead).
The current globalization broke with this. The movement of capital from the metropolis to
the third world, especially to East, South, and Southeast Asia to relocate plants there and
take advantage of their lower wages for meeting global demand, has led to a desegmentation of
the world economy, subjecting metropolitan wages to the restraining effect exercised by the
third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the
real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was
marginally lower -- than it had been in 1968. 5
At the same time, such relocation of activities, despite causing impressive growth rates of
gross domestic product (GDP) in many third world countries, does not lead to the exhaustion of
the third world's labor reserves. This is because of another feature of contemporary
globalization: the unleashing of a process of primitive accumulation of capital against petty
producers, including peasant agriculturists in the third world, who had earlier been protected,
to an extent, from the encroachment of big capital (both domestic and foreign) by the
postcolonial dirigiste regimes in these countries. Under neoliberalism, such protection
is withdrawn, causing an income squeeze on these producers and often their outright
dispossession from their land, which is then used by big capital for its various so-called
development projects. The increase in employment, even in countries with impressive GDP growth
rates in the third world, falls way short of the natural growth of the workforce, let alone
absorbing the additional job seekers coming from the ranks of displaced petty producers. The
labor reserves therefore never get used up. Indeed, on the contrary, they are augmented
further, because real wages continue to remain tied to a subsistence level, even as
metropolitan wages too are restrained. The vector of real wages in the world economy as a whole
therefore remains restrained.
Although contemporary globalization thus gives rise to an ex ante tendency toward
overproduction, state expenditure that could provide a counter to this (and had provided a
counter through military spending in the United States, according to Baran and Sweezy) can no
longer do so under the current regime. Finance is usually opposed to direct state intervention
through larger spending as a way of increasing employment. This opposition expresses itself
through an opposition not just to larger taxes on capitalists, but also to a larger fiscal
deficit for financing such spending. Obviously, if larger state spending is financed by taxes
on workers, then it hardly adds to aggregate demand, for workers spend the bulk of their
incomes anyway, so the state taking this income and spending it instead does not add any extra
demand. Hence, larger state spending can increase employment only if it is financed either
through a fiscal deficit or through taxes on capitalists who keep a part of their income
unspent or saved. But these are precisely the two modes of financing state expenditure that
finance capital opposes.
Its opposing larger taxes on capitalists is understandable, but why is it so opposed to a
larger fiscal deficit? Even within a capitalist economy, there are no sound economic
theoretical reasons that should preclude a fiscal deficit under all circumstances. The root of
the opposition therefore lies in deeper social considerations: if the capitalist economic
system becomes dependent on the state to promote employment directly , then this fact
undermines the social legitimacy of capitalism. The need for the state to boost the animal
spirits of the capitalists disappears and a perspective on the system that is epistemically
exterior to it is provided to the people, making it possible for them to ask: If the state can
do the job of providing employment, then why do we need the capitalists at all? It is an
instinctive appreciation of this potential danger that underlies the opposition of capital,
especially of finance, to any direct effort by the state to generate employment.
This ever-present opposition becomes decisive within a regime of globalization. As long as
finance capital remains national -- that is, nation-based -- and the state is a nation-state,
the latter can override this opposition under certain circumstances, such as in the post-Second
World War period when capitalism was facing an existential crisis. But when finance capital is
globalized, meaning, when it is free to move across country borders while the state remains a
nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large
fiscal deficits against its wishes, then it would simply leave that country en masse ,
causing a financial crisis.
The state therefore capitulates to the demands of globalized finance capital and eschews
direct fiscal intervention for increasing demand. It resorts to monetary policy instead since
that operates through wealth holders' decisions, and hence does not undermine their
social position. But, precisely for this reason, monetary policy is an ineffective instrument,
as was evident in the United States in the aftermath of the 2007–09 crisis when even the
pushing of interest rates down to zero scarcely revived activity. 6
It may be thought that this compulsion on the part of the state to accede to the demand of
finance to eschew fiscal intervention for enlarging employment should not hold for the United
States. Its currency being considered by the world's wealth holders to be "as good as gold"
should make it immune to capital flight. But there is an additional factor operating in the
case of the United States: that the demand generated by a bigger U.S. fiscal deficit would
substantially leak abroad in a neoliberal setting, which would increase its external debt
(since, unlike Britain in its heyday, it does not have access to any unrequited colonial
transfers) for the sake of generating employment elsewhere. This fact deters any fiscal effort
even in the United States to boost demand within a neoliberal setting. 7
Therefore, it follows that state spending cannot provide a counter to the ex ante
tendency toward global overproduction within a regime of neoliberal globalization, which makes
the world economy precariously dependent on occasional asset-price bubbles, primarily in the
U.S. economy, for obtaining, at best, some temporary relief from the crisis. It is this fact
that underlies the dead end that neoliberal capitalism has reached. Indeed, Donald Trump's
resort to protectionism in the United States to alleviate unemployment is a clear recognition
of the system having reached this cul-de-sac. The fact that the mightiest capitalist
economy in the world has to move away from the rules of the neoliberal game in an attempt to
alleviate its crisis of unemployment/underemployment -- while compensating capitalists
adversely affected by this move through tax cuts, as well as carefully ensuring that no
restraints are imposed on free cross-border financial flows -- shows that these rules
are no longer viable in their pristine form.
Some Implications of This Dead End
There are at least four important implications of this dead end of neoliberalism. The first
is that the world economy will now be afflicted by much higher levels of unemployment than it
was in the last decade of the twentieth century and the early years of the twenty-first, when
the dot-com and the housing bubbles in the United States had, sequentially, a pronounced
impact. It is true that the U.S. unemployment rate today appears to be at a historic low, but
this is misleading: the labor-force participation rate in the United States today is lower than
it was in 2008, which reflects the discouraged-worker effect . Adjusting for this lower
participation, the U.S. unemployment rate is considerable -- around 8 percent. Indeed, Trump
would not be imposing protection in the United States if unemployment was actually as low as 4
percent, which is the official figure. Elsewhere in the world, of course, unemployment
post-2008 continues to be evidently higher than before. Indeed, the severity of the current
problem of below-full-employment production in the U.S. economy is best illustrated by capacity
utilization figures in manufacturing. The weakness of the U.S. recovery from the Great
Recession is indicated by the fact that the current extended recovery represents the first
decade in the entire post-Second World War period in which capacity utilization in
manufacturing has never risen as high as 80 percent in a single quarter, with the resulting
stagnation of investment. 8
If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a
beggar-my-neighbor policy, does lead to a significant export of unemployment from the
United States, then it will invite retaliation and trigger a trade war that will only worsen
the crisis for the world economy as a whole by dampening global investment. Indeed, since the
United States has been targeting China in particular, some retaliatory measures have already
appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be
because the export of unemployment from the United States is insubstantial, keeping
unemployment everywhere, including in the United States, as precarious as it is now. However we
look at it, the world would henceforth face higher levels of unemployment.
There has been some discussion on how global value chains would be affected by Trump's
protectionism. But the fact that global macroeconomics in the early twenty-first century will
look altogether different compared to earlier has not been much discussed.
In light of the preceding discussion, one could say that if, instead of individual
nation-states whose writ cannot possibly run against globalized finance capital, there was a
global state or a set of major nation-states acting in unison to override the objections of
globalized finance and provide a coordinated fiscal stimulus to the world economy, then perhaps
there could be recovery. Such a coordinated fiscal stimulus was suggested by a group of German
trade unionists, as well as by John Maynard Keynes during the Great Depression in the 1930s.
9
While it was turned down then, in the present context it has not even been discussed.
The second implication of this dead end is that the era of export-led growth is by and large
over for third world economies. The slowing down of world economic growth, together with
protectionism in the United States against successful third world exporters, which could even
spread to other metropolitan economies, suggests that the strategy of relying on the world
market to generate domestic growth has run out of steam. Third world economies, including the
ones that have been very successful at exporting, would now have to rely much more on their
home market.
Such a transition will not be easy; it will require promoting domestic peasant agriculture,
defending petty production, moving toward cooperative forms of production, and ensuring greater
equality in income distribution, all of which need major structural shifts. For smaller
economies, it would also require their coming together with other economies to provide a
minimum size to the domestic market. In short, the dead end of neoliberalism also means the
need for a shift away from the so-called neoliberal development strategy that has held sway
until now.
The third implication is the imminent engulfing of a whole range of third world economies in
serious balance-of-payments difficulties. This is because, while their exports will be sluggish
in the new situation, this very fact will also discourage financial inflows into their
economies, whose easy availability had enabled them to maintain current account deficits on
their balance of payments earlier. In such a situation, within the existing neoliberal
paradigm, they would be forced to adopt austerity measures that would impose income deflation
on their people, make the conditions of their people significantly worse, lead to a further
handing over of their national assets and resources to international capital, and prevent
precisely any possible transition to an alternative strategy of home market-based growth.
In other words, we shall now have an intensification of the imperialist stranglehold over
third world economies, especially those pushed into unsustainable balance-of-payments deficits
in the new situation. By imperialism , here we do not mean the imperialism of this or
that major power, but the imperialism of international finance capital, with which even
domestic big bourgeoisies are integrated, directed against their own working people.
The fourth implication is the worldwide upsurge of fascism. Neoliberal capitalism even
before it reached a dead end, even in the period when it achieved reasonable growth and
employment rates, had pushed the world into greater hunger and poverty. For instance, the world
per-capita cereal output was 355 kilograms for 1980 (triennium average for 1979–81
divided by mid–triennium population) and fell to 343 in 2000, leveling at 344.9 in 2016
-- and a substantial amount of this last figure went into ethanol production. Clearly, in a
period of growth of the world economy, per-capita cereal absorption should be expanding,
especially since we are talking here not just of direct absorption but of direct and indirect
absorption, the latter through processed foods and feed grains in animal products. The fact
that there was an absolute decline in per-capita output, which no doubt caused a decline in
per-capita absorption, suggests an absolute worsening in the nutritional level of a substantial
segment of the world's population.
But this growing hunger and nutritional poverty did not immediately arouse any significant
resistance, both because such resistance itself becomes more difficult under neoliberalism
(since the very globalization of capital makes it an elusive target) and also because higher
GDP growth rates provided a hope that distress might be overcome in the course of time.
Peasants in distress, for instance, entertained the hope that their children would live better
in the years to come if given a modicum of education and accepted their fate.
In short, the ideology of neoliberal capitalism was the promise of growth. But with
neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological
prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop
and finds fascism. This changes the discourse away from the material conditions of people's
lives to the so-called threat to the nation, placing the blame for people's distress not on the
failure of the system, but on ethnic, linguistic, and religious minority groups, the
other that is portrayed as an enemy. It projects a so-called messiah whose sheer
muscularity can somehow magically overcome all problems; it promotes a culture of unreason so
that both the vilification of the other and the magical powers of the supposed leader
can be placed beyond any intellectual questioning; it uses a combination of state repression
and street-level vigilantism by fascist thugs to terrorize opponents; and it forges a close
relationship with big business, or, in Kalecki's words, "a partnership of big business and
fascist upstarts." 10
Fascist groups of one kind or another exist in all modern societies. They move center stage
and even into power only on certain occasions when they get the backing of big business. And
these occasions arise when three conditions are satisfied: when there is an economic crisis so
the system cannot simply go on as before; when the usual liberal establishment is manifestly
incapable of resolving the crisis; and when the left is not strong enough to provide an
alternative to the people in order to move out of the conjuncture.
This last point may appear odd at first, since many see the big bourgeoisie's recourse to
fascism as a counter to the growth of the left's strength in the context of a capitalist
crisis. But when the left poses a serious threat, the response of the big bourgeoisie typically
is to attempt to split it by offering concessions. It uses fascism to prop itself up only when
the left is weakened. Walter Benjamin's remark that "behind every fascism there is a failed
revolution" points in this direction.
Fascism Then and Now
Contemporary fascism, however, differs in crucial respects from its 1930s counterpart, which
is why many are reluctant to call the current phenomenon a fascist upsurge. But historical
parallels, if carefully drawn, can be useful. While in some aforementioned respects
contemporary fascism does resemble the phenomenon of the 1930s, there are serious differences
between the two that must also be noted.
First, we must note that while the current fascist upsurge has put fascist elements in power
in many countries, there are no fascist states of the 1930s kind as of yet. Even if the fascist
elements in power try to push the country toward a fascist state, it is not clear that they
will succeed. There are many reasons for this, but an important one is that fascists in power
today cannot overcome the crisis of neoliberalism, since they accept the regime of
globalization of finance. This includes Trump, despite his protectionism. In the 1930s,
however, this was not the case. The horrors associated with the institution of a fascist state
in the 1930s had been camouflaged to an extent by the ability of the fascists in power to
overcome mass unemployment and end the Depression through larger military spending, financed by
government borrowing. Contemporary fascism, by contrast, lacks the ability to overcome the
opposition of international finance capital to fiscal activism on the part of the government to
generate larger demand, output, and employment, even via military spending.
Such activism, as discussed earlier, required larger government spending financed either
through taxes on capitalists or through a fiscal deficit. Finance capital was opposed to both
of these measures and it being globalized made this opposition decisive . The
decisiveness of this opposition remains even if the government happens to be one composed of
fascist elements. Hence, contemporary fascism, straitjacketed by "fiscal rectitude," cannot
possibly alleviate even temporarily the economic crises facing people and cannot provide any
cover for a transition to a fascist state akin to the ones of the 1930s, which makes such a
transition that much more unlikely.
Another difference is also related to the phenomenon of the globalization of finance. The
1930s were marked by what Lenin had earlier called "interimperialist rivalry." The military
expenditures incurred by fascist governments, even though they pulled countries out of the
Depression and unemployment, inevitably led to wars for "repartitioning an already partitioned
world." Fascism was the progenitor of war and burned itself out through war at, needless to
say, great cost to humankind.
Contemporary fascism, however, operates in a world where interimperialist rivalry is far
more muted. Some have seen in this muting a vindication of Karl Kautsky's vision of an
"ultraimperialism" as against Lenin's emphasis on the permanence of interimperialist rivalry,
but this is wrong. Both Kautsky and Lenin were talking about a world where finance capital and
the financial oligarchy were essentially national -- that is, German, French, or British. And
while Kautsky talked about the possibility of truces among the rival oligarchies, Lenin saw
such truces only as transient phenomena punctuating the ubiquity of rivalry.
In contrast, what we have today is not nation-based finance capitals, but
international finance capital into whose corpus the finance capitals drawn from
particular countries are integrated. This globalized finance capital does not want the world
to be partitioned into economic territories of rival powers ; on the contrary, it wants the
entire globe to be open to its own unrestricted movement. The muting of rivalry between major
powers, therefore, is not because they prefer truce to war, or peaceful partitioning of the
world to forcible repartitioning, but because the material conditions themselves have changed
so that it is no longer a matter of such choices. The world has gone beyond both Lenin and
Kautsky, as well as their debates.
Not only are we not going to have wars between major powers in this era of fascist upsurge
(of course, as will be discussed, we shall have other wars), but, by the same token, this
fascist upsurge will not burn out through any cataclysmic war. What we are likely to see is a
lingering fascism of less murderous intensity , which, when in power, does not
necessarily do away with all the forms of bourgeois democracy, does not necessarily physically
annihilate the opposition, and may even allow itself to get voted out of power occasionally.
But since its successor government, as long as it remains within the confines of the neoliberal
strategy, will also be incapable of alleviating the crisis, the fascist elements are likely to
return to power as well. And whether the fascist elements are in or out of power, they will
remain a potent force working toward the fascification of the society and the polity, even
while promoting corporate interests within a regime of globalization of finance, and hence
permanently maintaining the "partnership between big business and fascist upstarts."
Put differently, since the contemporary fascist upsurge is not likely to burn itself out as
the earlier one did, it has to be overcome by transcending the very conjuncture that produced
it: neoliberal capitalism at a dead end. A class mobilization of working people around an
alternative set of transitional demands that do not necessarily directly target neoliberal
capitalism, but which are immanently unrealizable within the regime of neoliberal capitalism,
can provide an initial way out of this conjuncture and lead to its eventual transcendence.
Such a class mobilization in the third world context would not mean making no truces with
liberal bourgeois elements against the fascists. On the contrary, since the liberal bourgeois
elements too are getting marginalized through a discourse of jingoistic nationalism typically
manufactured by the fascists, they too would like to shift the discourse toward the material
conditions of people's lives, no doubt claiming that an improvement in these conditions is
possible within the neoliberal economic regime itself. Such a shift in discourse is in
itself a major antifascist act . Experience will teach that the agenda advanced as part of
this changed discourse is unrealizable under neoliberalism, providing the scope for dialectical
intervention by the left to transcend neoliberal capitalism.
Imperialist
Interventions
Even though fascism will have a lingering presence in this conjuncture of "neoliberalism at
a dead end," with the backing of domestic corporate-financial interests that are themselves
integrated into the corpus of international finance capital, the working people in the third
world will increasingly demand better material conditions of life and thereby rupture the
fascist discourse of jingoistic nationalism (that ironically in a third world context is not
anti-imperialist).
In fact, neoliberalism reaching a dead end and having to rely on fascist elements revives
meaningful political activity, which the heyday of neoliberalism had precluded, because most
political formations then had been trapped within an identical neoliberal agenda that appeared
promising. (Latin America had a somewhat different history because neoliberalism arrived in
that continent through military dictatorships, not through its more or less tacit acceptance by
most political formations.)
Such revived political activity will necessarily throw up challenges to neoliberal
capitalism in particular countries. Imperialism, by which we mean the entire economic and
political arrangement sustaining the hegemony of international finance capital, will deal with
these challenges in at least four different ways.
The first is the so-called spontaneous method of capital flight. Any political formation
that seeks to take the country out of the neoliberal regime will witness capital flight even
before it has been elected to office, bringing the country to a financial crisis and thereby
denting its electoral prospects. And if perchance it still gets elected, the outflow will only
increase, even before it assumes office. The inevitable difficulties faced by the people may
well make the government back down at that stage. The sheer difficulty of transition away from
a neoliberal regime could be enough to bring even a government based on the support of workers
and peasants to its knees, precisely to save them short-term distress or to avoid losing their
support.
Even if capital controls are put in place, where there are current account deficits,
financing such deficits would pose a problem, necessitating some trade controls. But this is
where the second instrument of imperialism comes into play: the imposition of trade sanctions
by the metropolitan states, which then cajole other countries to stop buying from the
sanctioned country that is trying to break away from thralldom to globalized finance capital.
Even if the latter would have otherwise succeeded in stabilizing its economy despite its
attempt to break away, the imposition of sanctions becomes an additional blow.
The third weapon consists in carrying out so-called democratic or parliamentary coups of the
sort that Latin America has been experiencing. Coups in the old days were effected through the
local armed forces and necessarily meant the imposition of military dictatorships in lieu of
civilian, democratically elected governments. Now, taking advantage of the disaffection
generated within countries by the hardships caused by capital flight and imposed sanctions,
imperialism promotes coups through fascist or fascist-sympathizing middle-class political
elements in the name of restoring democracy, which is synonymous with the pursuit of
neoliberalism.
And if all these measures fail, there is always the possibility of resorting to economic
warfare (such as destroying Venezuela's electricity supply), and eventually to military
warfare. Venezuela today provides a classic example of what imperialist intervention in a third
world country is going to look like in the era of decline of neoliberal capitalism, when
revolts are going to characterize such countries more and more.
Two aspects of such intervention are striking. One is the virtual unanimity among the
metropolitan states, which only underscores the muting of interimperialist rivalry in the era
of hegemony of global finance capital. The other is the extent of support that such
intervention commands within metropolitan countries, from the right to even the liberal
segments.
Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing
for long. It has no vision for reinventing itself. Interestingly, in the period after the First
World War, when capitalism was on the verge of sinking into a crisis, the idea of state
intervention as a way of its revival had already been mooted, though its coming into vogue only
occurred at the end of the Second World War. 11
Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize
itself. And weapons like domestic fascism in the third world and direct imperialist
intervention cannot for long save it from the anger of the masses that is building up against
it.
Samuel Berrick Saul, Studies in British Overseas Trade, 1870–1914
(Liverpool: Liverpool University Press, 1960).
Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York:
Monthly Review Press, 1966).
One of the first authors to recognize this fact and its significance was Paul Baran in
The Political Economy of
Growth (New York: Monthly Review Press, 1957).
For the role of such colonial transfers in sustaining the British balance of payments and the
long Victorian and Edwardian boom, see Utsa Patnaik, "Revisiting the 'Drain,' or Transfers
from India to Britain in the Context of Global Diffusion of Capitalism," in Agrarian
and Other Histories: Essays for Binay Bhushan Chaudhuri , ed. Shubhra Chakrabarti and
Utsa Patnaik (Delhi: Tulika, 2017), 277-317.
Federal Reserve Board of Saint Louis Economic Research, FRED, "Capacity Utilization:
Manufacturing," February 2019 (updated March 27, 2019), http://fred.stlouisfed.org .
This issue is discussed by Charles P. Kindleberger in The World in Depression,
1929–1939 , 40th anniversary ed. (Oakland: University of California Press,
2013).
Joseph Schumpeter had seen Keynes's The Economic Consequences of the Peace as
essentially advocating such state intervention in the new situation. See his essay, "John
Maynard Keynes (1883–1946)," in Ten Great Economists (London: George Allen
& Unwin, 1952).
Utsa Patnaik is Professor Emerita at the Centre for Economic Studies and Planning,
Jawaharlal Nehru University, New Delhi. Her books include Peasant Class Differentiation (1987),
The Long Transition (1999), and The Republic of Hunger and Other Essays (2007). Prabhat Patnaik
is Professor Emeritus at the Centre for Economic Studies and Planning, Jawaharlal Nehru
University, New Delhi. His books include Accumulation and Stability Under Capitalism (1997),
The Value of Money(2009), and Re-envisioning Socialism(2011).
"... When the issues of poverty and inequality came up, a common neoliberal dodge was to invoke the Horatio Alger myth -- that in America, with hard work one can, or should be able to, raise oneself up by one' bootstraps. This switches the question from security ..."
"... As it happens, mobility has declined over the long term in the United States, but that aside, it's a two-way street. The escalator of life runs in both directions. Moreover, it's a separate issue from that of poverty or inequality. One can have more mobility and the same or worse poverty or inequality. The rising tide goes out as well as in. ..."
"... The neoliberal remedy for poverty and inequality is commonly held to be education, because workers lack the requisite skills to earn a living wage. It's kind of their fault. All that's needed is some reasonable public expenditure. No deeper structural factors are at issue. This mindset is contradicted now in two ways. ..."
When the issues of poverty and inequality came up, a common neoliberal dodge was to invoke
the Horatio Alger myth -- that in America, with hard work one can, or should be able to, raise
oneself up by one' bootstraps. This switches the question from security made possible by
the public sector to an individual responsibility for economic mobility.
As it happens, mobility has declined over the long term in the United States, but that
aside, it's a two-way street. The escalator of life runs in both directions. Moreover, it's a
separate issue from that of poverty or inequality. One can have more mobility and the same or
worse poverty or inequality. The rising tide goes out as well as in.
The neoliberal remedy for poverty and inequality is commonly held to be education, because
workers lack the requisite skills to earn a living wage. It's kind of their fault. All that's
needed is some reasonable public expenditure. No deeper structural factors are at issue. This
mindset is contradicted now in two ways.
First, the idea of education as an essential,
missing ingredient is being supplanted by the idea that what's at issue is power , both
political and economic . The wealthy control streams of income and institutions of
credentialization that could be rerouted, via taxation, to finance education ("free college") that has an equalizing effect on
wealth and enhances economic security..
.
"Yet, as this report will show, all of these rings -- and more -- were connected to the
same network that involved key figures linked to the Reagan White House and linked to
Roy Cohn -- revealing the true scope of the sordid sexual blackmail operations and sex
rings that involved the trafficking of children within the U.S. and even in Central
America for their exploitation by dangerous and powerful pedophiles in the United
States.
Appalling for both the villainous abuse of children itself and the chilling
implications of government by blackmail, this tangled web of unsavory alliances casts a
lurid light on the political history of the United States from the Prohibition Era
right up to the present day and the Age of Trump, a fact made increasingly clear as
more and more information comes to light in relation to the Jeffrey Epstein case."
Whitney Webb,
Too Big to Fail: Government By Blackmail
"For we wrestle not against flesh and blood, but against principalities and powers,
against the rulers of the darkness of this world, against spiritual wickedness in high
places."
"... The real unemployment rate is probably somewhere between 10%-12%. ..."
"... The U-6 also includes what the labor dept. calls involuntary part time employed. It should include the voluntary part time as well, but doesn't (See, they're not actively looking for work even if unemployed). ..."
"... But even the involuntary part time is itself under-estimated. I believe the Labor Dept. counts only those involuntarily part time unemployed whose part time job is their primary job. It doesn't count those who have second and third involuntary part time jobs. That would raise the U-6 unemployment rate significantly. The labor Dept's estimate of the 'discouraged' and 'missing labor force' is grossly underestimated. ..."
"... The labor dept. also misses the 1-2 million workers who went on social security disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment insurance. That number rose dramatically after 2008 and hasn't come down much (although the government and courts are going after them). ..."
"... The way the government calculates unemployment is by means of 60,000 monthly household surveys but that phone survey method misses a lot of workers who are undocumented and others working in the underground economy in the inner cities (about 10-12% of the economy according to most economists and therefore potentially 10-12% of the reported labor force in size as well). ..."
"... The SSDI, undocumented, underground, underestimation of part timers, etc. are what I call the 'hidden unemployed'. And that brings the unemployed well above the 3.7%. ..."
The real unemployment rate is probably somewhere between 10%-12%. Here's why: the 3.7% is
the U-3 rate, per the labor dept. But that's the rate only for full time employed. What the
labor dept. calls the U-6 includes what it calls discouraged workers (those who haven't looked
for work in the past 4 weeks). Then there's what's called the 'missing labor force'–i.e.
those who haven't looked in the past year. They're not calculated in the 3.7% U-3 unemployment
rate number either. Why? Because you have to be 'out of work and actively looking for work' to
be counted as unemployed and therefore part of the 3.7% rate.
The U-6 also includes what the labor dept. calls involuntary part time employed. It
should include the voluntary part time as well, but doesn't (See, they're not actively looking
for work even if unemployed).
But even the involuntary part time is itself under-estimated. I believe the Labor Dept.
counts only those involuntarily part time unemployed whose part time job is their primary job.
It doesn't count those who have second and third involuntary part time jobs. That would raise
the U-6 unemployment rate significantly. The labor Dept's estimate of the 'discouraged' and
'missing labor force' is grossly underestimated.
The labor dept. also misses the 1-2 million workers who went on social security
disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment
insurance. That number rose dramatically after 2008 and hasn't come down much (although the
government and courts are going after them).
The way the government calculates unemployment is by means of 60,000 monthly household
surveys but that phone survey method misses a lot of workers who are undocumented and others
working in the underground economy in the inner cities (about 10-12% of the economy according
to most economists and therefore potentially 10-12% of the reported labor force in size as
well). The labor dept. just makes assumptions about that number (conservatively, I may
add) and plugs in a number to be added to the unemployment totals. But it has no real idea of
how many undocumented or underground economy workers are actually employed or unemployed since
these workers do not participate in the labor dept. phone surveys, and who can blame them.
The SSDI, undocumented, underground, underestimation of part timers, etc. are what I
call the 'hidden unemployed'. And that brings the unemployed well above the 3.7%.
Finally, there's the corroborating evidence about what's called the labor force
participation rate. It has declined by roughly 5% since 2007. That's 6 to 9 million workers who
should have entered the labor force but haven't. The labor force should be that much larger,
but it isn't. Where have they gone? Did they just not enter the labor force? If not, they're
likely a majority unemployed, or in the underground economy, or belong to the labor dept's
'missing labor force' which should be much greater than reported. The government has no
adequate explanation why the participation rate has declined so dramatically. Or where have the
workers gone. If they had entered the labor force they would have been counted. And their 6 to
9 million would result in an increase in the total labor force number and therefore raise the
unemployment rate.
All these reasons–-i.e. only counting full timers in the official 3.7%;
under-estimating the size of the part time workforce; under-estimating the size of the
discouraged and so-called 'missing labor force'; using methodologies that don't capture the
undocumented and underground unemployed accurately; not counting part of the SSI increase as
unemployed; and reducing the total labor force because of the declining labor force
participation-–together means the true unemployment rate is definitely over 10% and
likely closer to 12%. And even that's a conservative estimate perhaps." Join the debate on
Facebook More articles by: Jack Rasmus
Jack Rasmus is author of the recently published book, 'Central Bankers at the End of
Their Ropes: Monetary Policy and the Coming Depression', Clarity Press, August 2017. He blogs
at jackrasmus.com and his twitter handle
is @drjackrasmus. His website is http://kyklosproductions.com .
Speech is controlled by political correctness. Someone behind the scenes decides what
is acceptable and what is not, what is desirable or not, and even what is permissible. You
make one 'mistake' and you are out; from the teaching positions at the universities, or
from the media outlets.
And what is permissible is becoming truly weird. These are comments on an article over
at http://www.thecollegefix.com
"Poll: 73 percent of Republican students have withheld political views in class for fear
their grades would suffer".
I'm ABD (all but dissertation) in Econometrics because my adviser was a Marxist nutcase
from the London School of Economics. I couldn't fight the communists forever; not when they
held all the cards.
Reply: Medina-Merino
I left my PhD program in Anthropology when on a "field trip" , my advisor and his
idiotic tie-dyed moron of a wife (former student of his) crawled into my tent on the
first night of a 2 week research project in black leather bondage harnesses and informed
me it was time for me to join them in a "night of pure pleasure".
Fast forward I got up, got into my car, drove through the night back to campus, parked
outside of the Dean's office, stormed in with wide-blood-shot-eyes when he arrived in his
700-Series turbo-charged Special Edition BMW and told him I wanted to file a complaint
against Professor "Bondo" and when he (Dean Bozo) did not respond to my request in over a
week, I withdrew from my program (ABD also) before the "Drop Deadline" so I could get
full refund of my hard-earned TENS OF THOUSANDS of tuition dollars and used the money to
secure an attorney (who I later learned was on-the-take for the University's own legal
counsel office of "Equity & Fairness") until I ran out of money and then left town to
take a position in Scotland on a research team studying Celtic migrations to the Northern
Coast of the Iberian Peninsula, known for centuries unofficially as the "Celtic Coast". I
loved my work and worked with some amazing and HONEST and RESPECTFUL colleagues.
I learned a big lesson from this EFFIN nightmare be verrrrrrrrrrrrrrry careful of
whose hands you find your career in there are a lot of filthy, abusive, corrupt "faculty"
and even more dishonest and disingenuous and despicable "administrators" in the
contemporary academy and many have brass name-plates on their doors and hold
do-nothing-but-damage-to-the-lives-of those who are often powerless against their callous
and deliberate abuses.
Even today, on my sleepless nights I can still hear Mr. Chips rustling in his
grave
I went on to hold positions of academic renown in Europe and Latin America and
eventually returned to the US when I knew I would be able to secure adjunct positions in
the US and Canada and Puerto Rico to support myself and my family, whose lives I was able
to maintain in a stable trajectory throughout this horror!
Revenge is sweet however today when I receive requests from my former "institution of
higher learning" I respond in the SASE
"NEVER WILL I EVER GIVE YOU ONE CENT FOR NOT HAVING PROTECTED ME FROM ABUSE AT THE HANDS
OF DR. "BONDO" YEARS AGO!" Even today, he is part of campus lore and is whispered about
in hushed tones.
What happened to the "prof" he died of very painful brain cancer (poetic justice) and
his idiot wife went full-tilt into drugs and is sitting in a pool of her own pee in a
very dismal geriatric ward. And the "Dean"? He is likewise awaiting his last days in his
luxury condo in Santa Barbara, CA surrounded by like-minded Lutheran do-gooders holding
prayer circles and burning incense and rubbing crystals for each of their pathetic
selves
Knuth: Well, certainly it seems the way things are going. You take any particular subject
that you are interested in and you try to see if somebody with an American high school
education has learned it, and you will be appalled. You know, Jesse Jackson thinks that
students know nothing about political science, and I am sure the chemists think that students
don't know chemistry, and so on. But somehow they get it when they have to later. But I would
say certainly the students now have been getting more of a superficial idea of mathematics than
they used to. We have to do remedial stuff at Stanford that we didn't have to do thirty years
ago.
Frana: Gio [Wiederhold] said much the same thing to me.
Knuth: The most scandalous thing was that Stanford's course in linear algebra could not get
to eigenvalues because the students didn't know about complex numbers. Now every course at
Stanford that takes linear algebra as a prerequisite does so because they want the students to
know about eigenvalues. But here at Stanford, with one of the highest admission standards of
any university, our students don't know complex numbers. So we have to teach them that when
they get to college. Yes, this is definitely a breakdown.
Frana: Was your mathematics training in high school particularly good, or was it that you
spent a lot of time actually doing problems?
Knuth: No, my mathematics training in high school was not good. My teachers could not answer
my questions and so I decided I'd go into physics. I mean, I had played with mathematics in
high school. I did a lot of work drawing graphs and plotting points and I used pi as the radix
of a number system, and explored what the world would be like if you wanted to do logarithms
and you had a number system based on pi. And I had played with stuff like that. But my teachers
couldn't answer questions that I had.
... ... ... Frana: Do you have an answer? Are American students different today? In one of
your interviews you discuss the problem of creativity versus gross absorption of knowledge.
Knuth: Well, that is part of it. Today we have mostly a sound byte culture, this lack of
attention span and trying to learn how to pass exams. Frana: Yes,
Trumpism Is Bad for Business
It's hard to make plans when the rules keep changing.
By Paul Krugman
With each passing week it becomes ever clearer that Donald Trump's trade war, far from
being "good, and easy to win," is damaging large parts of the U.S. economy. Farmers are
facing financial disaster; manufacturing, which Trump's policies were supposed to revive, is
contracting; consumer confidence is plunging, largely because the public (rightly) fears that
tariffs will raise prices.
But Trump has an answer to his critics: It's not me, it's you. Last week he declared that
businesses claiming to have been hurt by his tariffs should blame themselves, because they're
"badly run and weak."
As with many Trump statements, one immediate thought that comes to mind is, how would
Republicans have reacted if a Democratic president said something like that? In this case,
however, we don't have to speculate.
As some readers may recall, back in 2012 Barack Obama made the obvious and true point that
businesses depend on public investments in things like roads and education as well as on
their own efforts. Referring to those public investments, he said, "You didn't build that."
The usual suspects pounced, taking the line out of context and claiming that he was
disrespecting entrepreneurs; Mitt Romney made this claim a centerpiece of his presidential
campaign.
Attacks on Obama as being anti-business were, of course, made in bad faith. Trump,
however, really is denouncing businesses and blaming them for the problems his policies have
created. And tariffs aren't the only policy area where Trump and American business are now at
odds.
Some of Trump's most consequential actions involve his frantic efforts to dismantle
environmental regulation. Unlike tariffs, this may at first sound like something business
would want.
It turns out, however, that many businesses want to keep those regulations in place. Major
oil and gas producers oppose Trump's relaxation of rules on emissions of methane, a potent
greenhouse gas. Major auto producers have come out against Trump's attempt to roll back fuel
efficiency standards. In fact, in a move that has reportedly enraged Trump, several companies
have reached an agreement with the state of California to stick with Obama-era rules despite
the change in federal policy.
When Trump won his upset victory in 2016, many investors assumed that his rule would be
good for business. And he did indeed give corporations a huge tax cut -- which has almost
entirely been used for higher dividends and stock buybacks, with workers getting essentially
nothing.
Aside from the tax cut, however, it's becoming increasingly clear that Trumpism is bad for
business. Or more precisely, it's bad for productive business.
Imagine yourself as the head of a business that plans and expects to be around for a long
time. Sure, you'd like to pay less in taxes and not have to comply with costly regulations.
But you also want to invest in your company's future. And to do that, you need some assurance
that the rules of the game will be stable, so that whatever investments you make now aren't
suddenly made worthless by future shifts in policy.
The big complaint business has about Trump's trade war isn't just that tariffs raise costs
and prices, while foreign retaliation is cutting off access to important markets. It is that
businesses can't make plans when policy zigzags in response to the president's whims. They
don't want to invest in anything that relies on a global supply chain, because that supply
chain might unravel with Trump's next tweet. But they can't invest on the assumption that
Trump's tariffs will be permanent, either; you never know when or whether he'll declare
victory and surrender.
Environmental policy, it turns out, is similar. Business leaders aren't do-gooders, but
they are realists. Most of them understand that climate change is happening, that it's
dangerous, and that we'll eventually have to transition to a low-emissions economy. They want
to spend now to secure their place in that future economy; they know that investments that
worsen climate change are bound to be long-run losers. But they'll hold off on investing in
our energy future as long as conspiracy theorists who consider global warming a gigantic hoax
-- and/or vindictive politicians determined to erase Obama's achievements -- keep rewriting
the rules.
To be fair, however, some kinds of business do thrive under Trumpism -- namely, businesses
that aren't in it for the long run, operations whose strategy is to take the money and run.
These are good times for mining companies that rush in to extract whatever they can, leaving
a poisoned landscape behind; for real estate speculators sponsoring dubious ventures that
take advantage of newly created tax loopholes; for for-profit colleges that leave their
students with worthless degrees and crippling debt.
In other words, under Trump it's springtime for grifters.
But to say the obvious, these smash-and-grab operations aren't the kinds of business we
want to thrive. Put it this way: Remaking the U.S. economy in the image of Trump University
isn't exactly making America great again.
Krugman became too superficial to read and take seriously. He is now mostly neoliberal
propagandist and Clinton wing of Dems stooge not the analyst.
As for his optimistic take on business realism " Business leaders aren't do-gooders, but they
are realists. Most of them understand that climate change is happening, that it's dangerous,
" compare with John Kenneth Galbraith "People of privilege will always risk their complete
destruction rather than surrender any material part of their advantage." and "The sense of
responsibility in the financial community for the community as a whole is not small. It is
nearly nil."
Why Professor Krugman thinks that "Aside from the tax cut, however, it's becoming
increasingly clear that Trumpism is bad for business. Or more precisely, it's bad for
productive business." and not to Wall Street and Silicon valley is unclear to me.
Even a perverted way of protecting domestic manufactures that Trump clearly practice is
better then nothing.
There is at least one bull market underway: in recession fears.
It's apparent in how ordinary Americans are thinking about the economy. In August, consumer
sentiment suffered its biggest drop since 2012, and Google searches for the term "recession"
surged to their highest levels in more than a decade.
There are also signs that business activity is slackening. The factory sector is slowing
worldwide, and according to a closely watched survey released Tuesday, American manufacturing
began contracting in August for the first time since 2016.
So how worried should Americans really be? The answer isn't as simple as either "run for the
hills" or "everything is fine."
Rather, based on financial market moves and the economic data available so far, a period of
sluggish growth looks more likely than an outright recession.
It might be painful in industries directly affected by the trade wars and the global
manufacturing slowdown. But those sectors are a relatively small share of the economy. Even as
the risk of recession has clearly increased in the last several weeks, there are also sources
of resilience that have every chance of proving powerful enough to keep the decade-long
expansion going.
The economy could experience a rough patch without tilting all the way into recession, which
the National Bureau of Economic Research defines as "a significant decline in economic activity
spread across the economy, lasting more than a few months," and normally visible in a wide
range of indicators.
We recently explored the ways a recession could happen in 2020. But it's worth asking the
opposite question: What are the reasons to think that the long expansion can continue despite
endless trade wars, a slowing global economy and turbulent markets?
In this benign scenario for the year ahead, strong consumer spending powers the economy
forward; the economic damage from the trade wars remains mostly confined to the manufacturing
and agriculture sectors; and the Federal Reserve's shift toward easier money since the start of
2019 kicks in with its usual delayed effects.
American consumers have been the drivers of the expansion this year, increasing their
spending even as businesses display more caution. Because consumer spending accounts for a much
larger share of the economy than business investment does, that has propelled overall
growth.
The Labor Department will release its monthly reading on the job market on Friday, but so
far in 2019 things have been pretty good for American workers.
The unemployment rate has now been 4 percent or lower for more than a year. The longer that
persists, the more employers may be forced to adjust their operations in ways that favor
longer-term growth: by offering better pay and benefits, by investing in productivity-enhancing
equipment, and by investing in training for workers who might lack traditional qualifications
or have a checkered work history.
If business investment drops severely, it could translate into layoffs and a weaker labor
market and thus weaker consumer spending. But there are recent episodes in which business
investment shrank but consumer spending kept growing.
For example, from mid-2015 to mid-2016, there was a huge pullback in business investment,
caused by falling commodity prices and a slowing global economy. Yet personal consumption
expenditures rose 2.7 percent in that 12-month period, about the same rate as now, which kept
the American economy as a whole out of recession.
Similarly, consumer spending kept rising despite a steep pullback in business spending after
the dot-com crash in 2000 and 2001. That helped make the 2001 recession mild by historical
standards -- and it probably wouldn't have been classified a recession at all if the Sept. 11,
2001, terrorist attacks hadn't taken place.
There is plenty of reason to think, in other words, that American consumers will be
resilient even amid business pessimism.
Of course, that is true only so long as any business pullback is moderate and temporary. And
so the optimistic story for the economy in the coming year also relies on some measure of peace
in the trade wars.
One pattern evident since the trade skirmishes began in earnest in early 2018 has been that
businesses are able to adapt to moderate tariffs reasonably well. Through some combination of
relocating supply chains, raising prices, taking a hit to profit margins, or forcing suppliers
to take a hit to profits, they manage to keep the direct economic effect manageable.
The risk for the future is less about a 15 percent tariff on this or that particular
imported good, but rather a roiling series of open-ended trade wars on multiple fronts that
could trigger a breakdown in international commerce.
But the good news is that the trade war has so far had the most direct impact on
manufacturing and commodity-related industries, which are a moderate share of the overall
economy. As of August, only 8.5 percent of American jobs were in manufacturing.
In effect, the shift of the United States economy toward service industries over the last
two generations may have left it better able to endure a global trade and manufacturing
slowdown, particularly compared with export-reliant countries like China and Germany.
Finally, there is the Federal Reserve.
While lots of attention is being paid to whether or how much the Fed will cut interest rates
in the immediate future, the reality is that monetary policy affects the economy with long
lags. Moreover, it's not just actual interest rate adjustments that matter -- it is how markets
perceive the future direction of policy that affects how hard or easy it will be for businesses
and consumers to get money.
So, for example, as the Fed raised its target for interest rates in 2017 and 2018, the cost
for businesses seeking to borrow money rose even faster. The effective rate on BBB-rated
corporate debt -- a proxy for borrowing costs of moderately risky companies -- rose to 4.8
percent in December 2018 from 3.4 percent in September 2017.
One way of interpreting the slowdown in business spending this year is as a delayed result
of that higher cost of corporate borrowing percolating through the economy.
But in early 2019, the Fed signaled a slower path of future interest rate increases, and
this summer it began cutting rates. That has driven the rate on BBB-rated bonds down to 3.3
percent. Perhaps the reverse will happen as those lower rates percolate through the economy and
companies find it easier to justify new projects.
The same applies to consumer home buying, another key economic driver. Mortgage rates spiked
in 2018 and have plummeted lately, which could bode well for housing in the months ahead.
There are a lot of risks out there, and it makes sense for C.E.O.s and ordinary consumers to
be wary of what the future could hold. But for now, a gloomy economic future remains a
far-from-certain possibility.
likbez said in reply to Paine... > Dauntless household spending will re elect the Donald
?
Don't you think that China tariffs might put an end to household spending boom ? :-)
Rampant military spending (aka military Keynesianism ) might help to re-elect Donald...
But the main help will come from neoliberal democrats who are afraid of Sanders or Tulsi
victory more the defeat from Trump.
As a second war party they actually do not need to win the elections. MIC in close
cooperation with the Wall Street will feed them quite nicely in any case. Reply
Friday, September 06, 2019 at 11:05 PM
Top Wealth in the United States: New Estimates and Implications for Taxing the Rich
By Matthew Smith, Owen Zidar and Eric Zwick
Abstract
This paper uses administrative tax data to estimate top wealth in the United States. We
build on the capitalization approach in Saez and Zucman (2016) while accounting for
heterogeneity within asset classes when mapping income flows to wealth. Our approach reduces
bias in wealth estimates because wealth and rates of return are correlated. Overall, wealth
is very concentrated: the top 1% holds as much wealth as the bottom 90%. However, the
"P90-99" class holds more wealth than either group after accounting for heterogeneity.
Relative to a top 0.1% wealth share of more than 20% under equal returns, we estimate a top
0.1% wealth share of [15%] and find that the rise since 1980 in top wealth shares falls by
[half]. Top portfolios depend less on fixed income and public equity, depend more on private
equity and housing, and more closely match the composition reported in the SCF and estate tax
returns. Our adjustments reduce mechanical revenue estimates from a wealth tax and top
capital income shares in distributional national accounts, which depend on well-measured
estimates of top wealth. Though the capitalization approach has advantages over other methods
of estimating top wealth, we emphasize that considerable uncertainty remains inherent to the
approach by showing the sensitivity of estimates to different assumptions.
Thomas Piketty's New Book Brings Political Economy Back to Its Sources
By Branko Milanovic
In the same way that Capital in the Twenty-First Century transformed the way economists
look at inequality, Piketty's new book Capital and Ideology will transform the way political
scientists look at their own field.
Thomas Piketty's books are always monumental. Some are more monumental than others. His Top
Incomes in France in the Twentieth Century: Inequality and Redistribution,
1901–1998(published in French as Les hauts revenus en France au XXe siècle)
covered more than two centuries of income and wealth inequality, in addition to social and
political changes in France. His international bestseller Capital in the Twenty-First
Century(Le capital au XXI siècle) broadened this approach to the most important
Western countries (France, the United States, United Kingdom, and Germany). His new book
Capital and Ideology (to be published in English in March 2020; already published in France
as Capital et idéologie) broadens the scope even further, covering the entire world
and presenting a historical panorama of how ownership of assets (including people) was
treated, and justified, in various historical societies, from China, Japan, and India, to the
European-ruled American colonies, and feudal and capitalist societies in Europe. Just the
mention of the geographical and temporal scope of the book suffices to give the reader an
idea of its ambition.
Before I review Capital and Ideology, it is worth mentioning the importance of Piketty's
overall approach, present in all three of his books. His approach is characterized by the
methodological return of economics to its original and key functions: to be a science that
illuminates the interests and explains the behaviors of individuals and social classes in
their quotidian (material) life. This methodology rejects the dominant paradigm of the past
half-century, which increasingly ignored the role of classes and heterogeneous individuals in
the process of production and instead treated all people as abstract agents that maximize
their own income under certain constraints. The dominant paradigm has emptied almost all
social content from economics and presented a view of society that was as abstract as it was
false.
The reintroduction of actual life into economics by Piketty and several other economists
(not entirely coincidentally, most of them are economists interested in inequality) is much
more than just a return to the sources of political economy and economics. This is because
today, we have vastly more information (data) than was available to economists a century ago,
not only about our own contemporary societies but also about past societies. This combination
between political economy's original methodology and big data is what I call "turbo-Annales,"
after the French group of historians that pioneered the view of history as a social science
focusing on the broad social, economic, and political forces that shape the world. The topics
that interested classical political economy and the authors associated with the Annales
School can now be studied empirically, and even econometrically and experimentally -- things
which they could not do, both because of the scarcity of data and unavailability of modern
methodologies.
It is within this context that, I believe, we ought to consider Piketty's Capital and
Ideology. How successful was his approach, applied now to the world and over a very long
time-horizon?
"The dominant paradigm has emptied almost all social content from economics and presented
a view of society that was as abstract as it was false."
For the purposes of this review, I divide Piketty's book into two parts: the first, which
I already mentioned, looks at ideological justifications of inequality across different
societies (Parts 1 and 2 of the book, and to some extent Part 3); the second introduces an
entirely new way of studying recent political cleavages in modern societies (Part 4). I am
somewhat skeptical about Piketty's success in the first part, despite his enormous erudition
and his skills as a raconteur, because success in discussing something so geographically and
temporally immense is difficult to reach, even by the best-informed minds who have studied
different societies for the majority of their careers. Analyzing each of these societies
requires an extraordinarily high degree of sophisticated historical knowledge regarding
religious dogmas, political organization, social stratification, and the like. To take two
examples of authors who have tried to do it, one older and one more recent: Max Weber, during
his entire life (and more specifically in Economy and Society), and Francis Fukuyama in his
two-volume masterpiece on the origins of the political and economic order. In both cases, the
results were not always unanimously approved by specialists studying individual societies and
religions.
In his analysis of some of these societies, Piketty had to rely on somewhat
"straightforward" or simplified discussions of their structure and evolution, discussions
which at times seem plausible but superficial. In other words, each of these historical
societies, many of which lasted centuries, had gone through different phases in their
developments, phases which are subject to various interpretations. Treating such evolutions
as if they were a simple, uncontested story is reductionist. It is a choice of one plausible
historical narrative where many exist. This compares unfavorably with Piketty's own rich and
nuanced narrative in Top Incomes in France in the Twentieth Century.
While I am somewhat skeptical about that first part of the book, I am not skeptical about
the second. In this part, we find the Piketty who plays to his strength: bold and innovative
use of data which produces a new way of looking at phenomena that we all observe but were
unable to define so precisely. Here, Piketty is "playing" on the familiar Western economic
history "terrain" that he knows well, probably better than any other economist.
This part of the book looks empirically at the reasons that left-wing, or social
democratic parties have gradually transformed themselves from being the parties of the
less-educated and poorer classes to become the parties of the educated and affluent middle
and upper-middle classes. To a large extent, traditionally left parties have changed because
their original social-democratic agenda was so successful in opening up education and
high-income possibilities to the people who in the 1950s and 1960s came from modest
backgrounds. These people, the "winners" of social democracy, continued voting for left-wing
parties but their interests and worldview were no longer the same as that of their
(less-educated) parents. The parties' internal social structure thus changed -- the product
of their own political and social success. In Piketty's terms, they became the parties of the
"Brahmin left" (La gauche Brahmane), as opposed to the conservative right-wing parties, which
remained the parties of the "merchant right" (La droite marchande).
To simplify, the elite became divided between the educated "Brahmins" and the more
commercially-minded "investors," or capitalists. This development, however, left the people
who failed to experience upward educational and income mobility unrepresented, and those
people are the ones that feed the current "populist" wave. Quite extraordinarily, Piketty
shows the education and income shifts of left-wing parties' voters using very similar
long-term data from all major developed democracies (and India). The fact that the story is
so consistent across countries lends an almost uncanny plausibility to his hypothesis.
It is also striking, at least to me, that such multi-year, multi-country data were
apparently never used by political scientists to study this phenomenon. This part of
Piketty's book will likely transform, or at least affect, how political scientists look at
new political realignments and class politics in advanced democracies in the years to come.
In the same way that Capital in the Twenty-First Century has transformed how economists look
at inequality, Capital and Ideology will transform the way political scientists look at their
own field.
Branko Milanovic is a senior scholar at the Stone Center on Socio-Economic Inequality at the
Graduate Center, City University of New York.
When the Fed or the ECB raises rates, New Keynesian economic theory predicts that the hike
will eventually lead to a decrease in inflation, and that the path from point A to point B
will inevitably be accompanied by higher unemployment. But my own research suggests that New
Keynesian economic theory is wrong. After all, if the Fed were to raise the short-term rate
slowly and support equity markets with a guarantee to purchase a broad-based exchange-traded
fund at a fixed price, there is no reason why the rate increase should cause higher
unemployment.
----
Roger Farmer dumping on the Fed. Somehow a lot of economists have figured out that 'Uncle
cannot do it later'.
I have a different disagreement. First I note that the Fed always follows the One Year
Treasury, it is in the charts, that chart cannot be avoided. Second, once Treasury has
started the rate cycles, it is all over, we will complete the rate cycle, including a down
turn. This has been the case since 1980, likely earlier.
So, why do we fake it? For what purpose, except to say something stupid like Uncle can fix
it later. We always end up in the same place, imbalances that need correction, Treasury has
to take its losses. All the fakery does no one any good.
The end of Mankiw and his Phillips Curve
Comment on David Glasner on 'Mankiw's Phillips-Curve Agonistes'
Gregory Mankiw starts his history of the Phillips Curve with gossiping and name dropping:
"The economist George Akerlof, a Nobel laureate and the husband of the former Federal Reserve
chair Janet Yellen, once called the Phillips curve 'probably the single most important
macroeconomic relationship.' So it is worth recalling what the Phillips curve is, why it
plays a central role in mainstream economics and why it has so many critics. The story begins
in 1958, when the economist A. W. Phillips published an article reporting an inverse
relationship between unemployment and inflation in Britain. He reasoned that when
unemployment is high, workers are easy to find, so employers hardly raise wages, if they do
so at all. But when unemployment is low, employers have trouble attracting workers, so they
raise wages faster. Inflation in wages soon turns into inflation in the prices of goods and
services."
David Glasner immediately spots the fatal mistake of Mankiw's account: "I must note
parenthetically that, as I have written recently, a supply-demand framework (aka partial
equilibrium analysis) is not really the appropriate way to think about unemployment, because
the equilibrium level of wages and the rates of unemployment must be analyzed, as, using
different terminology, Keynes argued, in a general equilibrium, not a partial equilibrium,
framework." Unfortunately, David Glasner then gets lost in supply-demand-equilibrium
blather.
The Phillips Curve (better: Bastard or NAIRU Phillips Curve) is the centerpiece of
standard employment theory. Economists get employment theory wrong for 200+ years.#1-#5
The materially/formally inconsistent NAIRU Phillips Curve has to be replaced by the
correct macroeconomic Employment Law which is shown on Wikimedia.#6
From this equation follows:
(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek
letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates a budget
deficit = credit expansion, a ratio ρE less than 1 indicates credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF=W/PR leads to higher employment.
The complete employment equation contains in addition profit distribution, the public
sector, and foreign trade.
Items (i) and (ii) cover Keynes' familiar arguments about aggregate demand. The factor
cost ratio ρF as defined in (iii) embodies the macroeconomic price mechanism. The fact of
the matter is that overall employment INCREASES if the AVERAGE wage rate W INCREASES relative
to average price P and productivity R. Roughly speaking, price inflation is bad for
employment and wage inflation is good. This is the exact OPPOSITE of what microfounded
supply-demand-equilibrium economics teaches.
The testable Employment Law tells one that the best policy to stabilize employment on a
high level is a price inflation of zero and a wage inflation equal to productivity increases.
The 2 percent inflation target has always been political idiocy based on defective
theory.
The president of the Nebraska Farmers Union ripped President Trump on Wednesday over his escalating
trade war with China, calling it a "huge unforced error."
John Hansen said that even though China has been engaging in unfair trade practices for some
time and needed to be reigned in, Trump's decision to impose high tariffs on Beijing along with
other trading partners has hurt the United States. "The U.S. should have isolated China from
the rest of the world as they started on this effort," Hansen told Hill.TV. "Instead,
unfortunately, the president has isolated the U.S. from most of the rest of the world
economy."
"It was a huge unforced error so there's that issue," he added.
Hansen said Trump's trade policies haven't gotten to the "nuts and bolts of how do we go
about the business of making sure that farmers get paid a fair price for what they
produce."
Level 4/5 is the ability to read complex information and glean information from it, or in
numeracy, the ability to do algebra and above. You will note that only about 1 in 10 function at
this level. The vast majority function at about 6th to 8th grade competency.
This is just a hypothesis. Where are the facts ? The only facts that we have is that Epstein
always got a "special treatment" and the Maxwell and other accomplices were not arrested as is
usually ion such cases -- when prosecution tries to find "the weakest link" that starts telling
the story and will implicate others.
In most circles, the mystery of exactly how Epstein made his fortune was shrugged off as
simply part of his personal mystique. Epstein played the role of enigmatic billionaire 'to a
T', able to exude the persona of a man who could use his charm and wit to get anything he
wanted without revealing many of the nuts and bolts of how he rose to that position. He claimed
that he would only advise people whose personal wealth was over a billion, yet any 'evidence'
that he moved money around and made investments within the established industry markets were
small-time and insignificant.
... ... ...
Steve Pieczenik, who has a storied history as a psychiatrist and a terrorism expert with
important roles in foreign affairs with many U.S. administrations said the following about
Jeffrey Epstein in the video below:
I want to talk about the Epstein pedophilia ring, what
it really is, is a Mossad Israeli operative ring which goes back decades and decades.Jeff Epstein was picked out by the Mossad as the proper agent of influence, because, number
one, he was grandiose, two, he had some intelligence and he was so narcissistic that they could
manipulate him up and down and create a false front for him, which involved the fact that he
had multi-million dollars, multi-billion dollars.But to make sure that Jeffrey Epstein
was working properly, they had an operative from the Mossad who was named Maxwell, the daughter
of Robert Maxwell, one of the greatest crooks in the world, who was an Israeli Mossad
operative. When he died in 1991, he was either killed or he died, he was one of the biggest
contributors to Israeli national security than anybody else.What the Israelis did,
under the tutelage of two brilliant Mossad chiefs, both of whom used pedophilia as a honey trap
to encapsulate any one of our operatives in America. Jeff Epstein was a willing operative.
He
willingly was involved in pedophilia, the Israelis knew that, they created his story line, they
made believe he was a billionaire, Wexner was the theoretical backup man to him.Acosta,
the Secretary of Labor, was correct when he said that Epstein got off of the prosecutor's
indictment in Florida because he worked in the intelligence service. And it was not only the
Mossad who was involved, clearly the CIA was involved.
Blackmailer And Intelligence
Operative
In the clip below from the Collective Evolution Show on CETV (you can watch the full episode as part of your free 7-day trial
here ), Joe and I discussed not only Epstein's
role as a blackmailer and intelligence operative, but the fact that he is nothing more than one
person in a long line of people who have stepped in to play a role in these child sex
blackmailing operations.
Connecting Epstein's operations to current CIA and Mossad programs and
then further back even before the CIA existed, where these operations were formally being run
by the American mafia and other powerful figures, reveals important patterns that help us piece
together more accurately exactly what is happening in our world. If there is anything to pay
attention to regarding Epstein's death, it is the level of desperation on the part of these
powerful forces to squelch public attention around their very real organized criminal
conspiracy that operates between intelligence, government, law enforcement, mainstream media
and others, in which innocent women and children are taken, raped, and sometimes even tortured
and killed as mere casualties of the self-serving power struggles amongst factions of world
power.
Sep.04 -- Sean Carney, head of municipal strategy at BlackRock, discusses the municipal bond
market posting its best returns since 2014. He speaks with Bloomberg's Taylor Riggs in this
week's "Muni Moment" on "Bloomberg Markets."
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By Laura Ungar, who health issues out of Kaiser Health News' St. Louis office, and Trudy
Lieberman, a journalist for more than 45 years, and a past president of the Association of
Health Care Journalists. Originally published by Kaiser Health
News .
MEMPHIS, Tenn. -- Army veteran Eugene Milligan is 75 years old and blind. He uses a
wheelchair since losing half his right leg to diabetes and gets dialysis for kidney
failure.
And he has struggled to get enough to eat.
Earlier this year, he ended up in the hospital after burning himself while boiling water for
oatmeal. The long stay caused the Memphis vet to fall off a charity's rolls for home-delivered
Meals on Wheels , so he had
to rely on others, such as his son, a generous off-duty nurse and a local church to bring him
food.
"Many times, I've felt like I was starving," he said. "There's neighbors that need food too.
There's people at dialysis that need food. There's hunger everywhere."
Indeed, millions of seniors across the country quietly go hungry as the safety net designed
to catch them frays. Nearly 8% of Americans 60 and older were "food insecure" in 2017,
according to a recent study released
by the anti-hunger group Feeding America. That's 5.5 million seniors who don't have
consistent access to enough food for a healthy life, a number that has more than doubled since
2001 and is only expected to grow as America grays.
While the plight of hungry children elicits support and can be tackled in schools, the
plight of hungry older Americans is shrouded by isolation and a generation's pride. The problem
is most acute in parts of the South and Southwest. Louisiana has the highest rate among states,
with 12% of seniors facing food insecurity. Memphis fares worst among major metropolitan areas,
with 17% of seniors like Milligan unsure of their next meal.
And government relief falls short. One of the main federal programs helping seniors is
starved for money. The Older Americans Act -- passed more than half a century ago as part of
President Lyndon Johnson's Great Society reforms -- was amended in 1972 to provide for
home-delivered and group meals, along with other services, for anyone 60 and older. But its
funding has lagged far behind senior population growth, as well as economic inflation.
The biggest chunk of the act's budget, nutrition services, dropped by 8% over the past 18
years when adjusted for inflation, an AARP report
found in February. Home-delivered and group meals have decreased by nearly 21 million since
2005. Only a fraction of those facing food insecurity get any meal services under the act; a
U.S. Government
Accountability Office report examining 2013 data found 83% got none.
With the act set to expire Sept. 30, Congress is now considering its reauthorization and how
much to spend going forward.
Meanwhile, according to the U.S. Department of Agriculture, only 45% of eligible adults 60
and older have signed up for another source of federal aid: SNAP, the food stamp program for
America's poorest. Those who don't are typically either unaware they could qualify, believe
their benefits would be tiny or can no longer get to a grocery store to use them.
Even fewer seniors may have SNAP in the future. More than 13% of SNAP households with
elderly members would lose benefits under a recent Trump administration proposal.
For now, millions of seniors -- especially low-income ones -- go without. Across the nation,
waits are common to receive home-delivered meals from a crucial provider, Meals on Wheels, a
network of 5,000 community-based programs. In Memphis, for example, the wait to get on the
Meals on Wheels schedule is more than a year long.
"It's really sad because a meal is not an expensive thing," said Sally Jones Heinz,
president and CEO of the Metropolitan
Inter-Faith Association , which provides home-delivered meals in Memphis. "This shouldn't
be the way things are in 2019."
Since malnutrition exacerbates diseases and prevents healing, seniors without steady,
nutritious food can wind up in hospitals, which drives up Medicare and Medicaid costs, hitting taxpayers with an even
bigger bill . Sometimes seniors relapse quickly after discharge -- or worse.
Widower Robert Mukes, 71, starved to death on a cold December day in 2016, alone in his
Cincinnati apartment.
The Hamilton County Coroner listed the primary cause of death as "starvation of unknown
etiology" and noted "possible hypothermia," pointing out that his apartment had no electricity
or running water. Death records show the 5-foot-7-inch man weighed just 100.5 pounds.
A Clear Need
On a hot May morning in Memphis, seniors trickled into a food bank at the Riverside
Missionary Baptist Church, 3 miles from the opulent tourist mecca of Graceland. They picked up
boxes packed with canned goods, rice, vegetables and meat.
Marion Thomas, 63, placed her box in the trunk of a friend's car. She lives with chronic
back pain and high blood pressure and started coming to the pantry three years ago. She's
disabled, relies on Social Security and gets $42 a month from SNAP based on her income,
household size and other factors. That's much less than the average $125-a-month benefit for
households with seniors, but more than the $16 minimum that one in five such households get.
Still, Thomas said, "I can't buy very much."
A day later, the Mid-South Food Bank brought a "mobile pantry" to Latham Terrace, a senior
housing complex, where a long line of people waited. Some inched forward in wheelchairs; others
leaned on canes. One by one, they collected their allotments.
The need is just as real elsewhere. In Dallas, Texas, 69-year-old China Anderson squirrels
away milk, cookies and other parts of her home-delivered lunches for dinner because she can no
longer stand and cook due to scoliosis and eight deteriorating vertebral discs.
As seniors ration food, programs ration services.
Although more than a third of the Meals on Wheels money comes from the Older Americans Act,
even with additional public and private dollars, funds are still so limited that some programs
have no choice but to triage people using score sheets that assign points based on who needs
food the most. Seniors coming from the hospital and those without family usually top waiting
lists.
More than 1,000 were waiting on the Memphis area's list recently. And in Dallas, $4.1
million in donations wiped out a 1,000-person waiting list in December, but within months it
had crept back up to 100.
Nationally, "there are tens of thousands of seniors who are waiting," said Erika
Kelly , chief membership and advocacy officer for Meals on Wheels America. "While they're
waiting, their health deteriorates and, in some cases, we know seniors have died."
Edwin Walker, a deputy assistant secretary for the federal Administration on Aging,
acknowledged waits are a long-standing problem, but said 2.4 million people a year benefit from
the Older Americans Act's group or home-delivered meals, allowing them to stay independent and
healthy.
Seniors get human connection, as well as food, from these services. Aner Lee Murphy, a
102-year-old Meals on Wheels client in Memphis, counts on the visits with volunteers Libby and
Bob Anderson almost as much as the food. She calls them "my children," hugging them close and
offering a prayer each time they leave.
But others miss out on such physical and psychological nourishment. A devastating phone call
brought that home for Kim Daugherty, executive director of the Aging Commission of the
Mid-South , which connects seniors to service providers in the region. The woman on the
line told Daugherty she'd been on the waiting list for more than a year.
"Ma'am, there are several hundred people ahead of you," Daugherty reluctantly explained.
"I just need you all to remember," came the caller's haunting reply, "I'm hungry and I need
food."
A Slow Killer
James
Ziliak , a poverty researcher at the University of Kentucky who worked on the Feeding
America study, said food insecurity shot up with the Great Recession, starting in the late
2000s, and peaked in 2014. He said it shows no signs of dropping to pre-recession levels.
While older adults of all income levels can face difficulty accessing and preparing healthy
food, rates are highest among seniors in poverty. They are also high among minorities. More
than 17% of black seniors and 16% of Hispanic seniors are food insecure, compared with fewer
than 7% of white seniors.
A host of issues combine to set those seniors on a downward spiral, said registered
dietitian Lauri Wright , who
chairs the Department of Nutrition and Dietetics at the University of North Florida. Going to
the grocery store gets a lot harder if they can't drive. Expensive medications leave less money
for food. Chronic physical and mental health problems sap stamina and make it tough to cook.
Inch by inch, hungry seniors decline.
And, even if it rarely kills directly, hunger can complicate illness and kill slowly.
Malnutrition blunts immunity, which already tends to weaken as people age. Once they start
losing weight, they're more likely to grow frail and are more likely to die within a year, said
Dr. John Morley, director of the division of geriatric medicine at Saint Louis University.
Seniors just out of the hospital are particularly vulnerable. Many wind up getting
readmitted, pushing up taxpayers' costs for Medicare and Medicaid. A
recent analysis by the Bipartisan Policy Center found that Medicare could save $1.57 for
every dollar spent on home-delivered meals for chronically ill seniors after a
hospitalization.
Most hospitals don't refer senior outpatients to Meals on Wheels, and advocates say too few
insurance companies get involved in making sure seniors have enough to eat to keep them
healthy.
When Milligan, the Memphis veteran, burned himself with boiling water last winter and had to
be hospitalized for 65 days, he fell off the Metropolitan Inter-Faith Association's radar. The
meals he'd been getting for about a decade stopped.
Heinz, Metropolitan's CEO, said the association is usually able to start and stop meals for
short hospital stays. But, Heinz said, the association didn't hear from Milligan and kept
trying to deliver meals for a time while he was in the hospital, then notified the Aging
Commission of the Mid-South he wasn't home. As is standard procedure, Metropolitan officials
said, a staff member from the commission made three attempts to contact him and left a card at
the blind man's home.
But nothing happened when he got out of the hospital this spring. In mid-May, a nurse
referred him for meal delivery. Still, he didn't get meals because he faced a waitlist already
more than 1,000 names long.
After questions from Kaiser Health News, Heinz looked into Milligan's case and realized
that, as a former client, Milligan could get back on the delivery schedule faster.
But even then the process still has hurdles: The aging commission would need to conduct a
new home assessment for meals to resume. That has yet to happen because, amid the wait,
Milligan's health deteriorated.
A Murky Future
As the Older Americans Act awaits reauthorization this fall, many senior advocates worry
about its funding.
In June, the U.S. House passed a $93 million increase to the Older Americans Act's nutrition
programs, raising total funding by about 10% to $1 billion in the next fiscal year. In
inflation-adjusted dollars, that's still less than in 2009. And it still has to pass in the
Republican-controlled Senate, where the proposed increase faces long odds.
U.S. Rep. Suzanne Bonamici, an Oregon Democrat who chairs the Civil Rights and Human
Services Subcommittee, expects the panel to tackle legislation for reauthorization of the act
soon after members return from the August recess. She's now working with colleagues "to craft a
strong, bipartisan update," she said, that increases investments in nutrition programs as well
as other services.
"I'm confident the House will soon pass a robust bill," she said, "and I am hopeful that the
Senate will also move quickly so we can better meet the needs of our seniors."
In the meantime, "the need for home-delivered meals keeps increasing every year," said
Lorena Fernandez, who runs a meal
delivery program in Yakima, Wash. Activists are pressing state and local governments to
ensure seniors don't starve, with mixed results. In Louisiana, for example, anti-hunger
advocates stood on the state Capitol steps in May and unsuccessfully called on the state to
invest $1 million to buy food from Louisiana farmers to distribute to hungry residents.
Elsewhere, senior activists across the nation have participated each March in "March for Meals"
events such as walks, fundraisers and rallies designed to focus attention on the problem.
Private fundraising hasn't been easy everywhere, especially rural communities without much
wealth. Philanthropy has instead tended to flow to hungry kids, who outnumber hungry seniors
more than 2-to-1, according to Feeding America.
"Ten years ago, organizations had a goal of ending child hunger and a lot of innovation and
resources went into what could be done," said Jeremy Everett, executive director of Baylor
University's Texas Hunger Initiative. "The same thing has not happened in the senior adult
population." And that has left people struggling for enough food to eat.
As for Milligan, he didn't get back on Meals on Wheels before suffering complications
related to his dialysis in June. He ended up back in the hospital. Ironically, it was there
that he finally had a steady, if temporary, source of food.
It's impossible to know if his time without steady, nutritious food made a difference. What
is almost certain is that feeding him at home would have been far cheaper.
"Few economists worked at the Federal Reserve in the early 1950s. Those who were on the
staff of America's central bank were relegated to the basement, at a safe remove from the
corridors where real decisions were made.
Economists had their uses, allowed William McChesney Martin, then the Fed's chairman. But
they also had 'a far greater sense of confidence in their analyses than I have found to be
warranted'. They were best kept down with the surplus furniture and the rats." •
Indeed!
Thatcher was an English politico. It is not what she said, but what she did that counts. She is probably down in Dante's Inferno,
Ring 8, sub-rings 7-10. (Frauds and false councilors.) See, oh wayward sinners:
http://danteworlds.laits.utexas.edu/circle8b.html
Ah, you think that Milton should be at the bottom, eh? Then, I hope that he knows how to ice skate. (He was the worst kind
of 'class traitor.' [His parents were small store owner/managers.])
Ring 8 of the Inferno is for 'frauds' of all sorts, sub-rings 7-10 are reserved for Thieves, Deceivers, Schismatics, and Falsifiers.
Maggie should feel right at home there.
Pop on over to the BP spreadsheet and find the regional consumption tab. For some regions
there are countries broken out and for others, not. But on this tab you can get granularity
on what kind of oil, what constituent part of crude, was consumed.
Japan. The population decline is actually pretty recent -- only since 2010. Their decline
in consumption is popularly attributed to population reduction, and I have gotten this wrong,
too, but consumption decline has been since 1995 with population gain for 15 of those years.
In more detail, their consumption decline is not gasoline. They have increased gasoline burn
since 1995. (The Prius is the 2nd most popular car in Japan and it first went on sale in
1997, so Prius didn't kill gasoline burn, which has increased).
It's middle distillates and Fuel Oil that are way down. Stuff that fuels big commercial
engines. That's what has fallen. Fuel Oil is more than maritime bunker fuel. It powers big
stuff. There was a sharp uptick of Fuel Oil consumption . . of 44% in 2012 because it was
Fuel Oil that was called on to generate electricity when all the reactors were shut down
during the quake panic. But the reactors returned and Fuel Oil resumed its decline.
One last thing that could blow all those paras out of the water. Japan had until recently
more refinery capacity than internal consumption. It's a lot like Singapore. The crude comes
in and product exports and this seems to somehow corrupt all measurements. The govt recently
shut down many of the refineries. It wasn't voluntary. Gov't ordered. Now Japan has to import
fuels, not just crude. Quite a lot. Which likely confuses the consumption measurements
further.
Ok I read this blog quite regularly but now I'm confused. US oil production has actually
fallen since the start of the year?
Dennis, can you respond to that? I thought I was just reading in the last post that the
current completion rate in the Permian was enough to raise production for five more years or
so. July is probably skewed because of the hurricane, but what gives?
It's definitely slowing. See my first post on June monthly production. When you add all the
states with shale production, there is no growth from May to June. Yes, July should be down
significantly due to the hurricane, but I expect no growth from shale.
Dennis sees an increase, Ron sees it plunging. I see it flat for a few months, and slowly
trending down. Pick your poison.
Yes the increase is pretty small for tight oil over the next 5 years only an average
annual rate of increase of 344 kb/d for US tight oil from 2019 to 2024 for the flat
completion rate scenario. This is a far cry from the 1620 kb/d increase in US tight oil
output from Dec 2017 to Dec 2018, a factor of 4.7 times slower on average than the rapid rate
of increase in 2018.
No US C+C output in June 2019 was 12,082 kb/d and in Dec 2018 US C+C output was 12,038
kb/d, so output has risen, but not by much. Yes a flat completion rate could lead to a rise
in tight oil output until 2025, though conventional output could fall to offset this.
Conventional output has been falling of late as fewer new conventional wells have been
completed for the past 6 months.
The current financial strain on shale producers is likely to intensify as many companies that
took on debt after the 2016 oil slump face large debt maturities in the next four years. As
of July, about $9 billion was set to mature throughout the remainder of 2019, but about $137
billion will be due between 2020 and 2022, according to S&P.
Seems that there will be more bancurupt filings in the years to come.
What is interesting is the footnotes. The first one says: " The supply of existing oil
production naturally declines at an **estimated 7 percent per year** without further
investment. Significant investment is needed to offset this natural decline and meet the
projected demand growth." The 7 percent figure caught my eye.
Also see the footnote about the switch over to Biofuels but Biofuels are such a very small
amount.
Continuing to look at the Regional Consumption tab from the World Stat stuff.
There is this category called Others. BP defines it as:
" 'Others' consists of refinery gas, liquefied petroleum gas (LPG), solvents, petroleum
coke, lubricants, bitumen, wax, other refined products and refinery fuel and loss."
This is not trivial afterthought. This is over 20% of the total oil consumption for nearly
all countries/regions. 24% for the whole world, and that deserves a !!!
It's 41% for India, also deserving a !!! I happen to know this derives from LPG, a hugely
popular transportation fuel in India.
China, 30%.
US 22.6%
India's total oil consumption last year was 5.9%. Light distillates had 10% growth,
gasoline 8.9%. Others, 6%. EVs and hybrids did nothing to gasoline burn there, which you
would expect for such a narrow niche product for rich people in year-round warm cities. They
didn't drive much anyway. And of course rural driving is a big thing in India, per the recent
item about political campaigns travelling place to place by road.
China's total oil consumption last year was +5.6%. Light distillates +7.3%. Kerosene/jet
fuel + 14% (!!!) Others, 7.1%.
And ditto.
As noted above Japan's consumption drop has been from lost economic activity, not
population, and it burns more gasoline today than in 1995, so Prius didn't do much there.
Their big loss is in middle distillates, because they shut down a lot of factories. Repeat,
population ROSE in Japan up to 2010. Only since then has it fallen and middle distillate
consumption (and Others consumption) has been falling steadily since 1995, even when
population was rising.
First you lose your economy, then you lose your food.
(Caveat about refinery exports from previous comment)
From the EIA monthly I see the US oil and condensate production was:
April 12. 123 Mbpd
May 12. 115 Mbpd ( – 8 000 bpd / 0,1%)
June 12. 082 Mbpd ( – 33 000 bpd/ 0,3%).
Will be very i teresting to see the production for July and August including new pipeline
capacity. To me it seems like the DUCS that was good have now been used, Baker Hughes drill
statistick document number of riggs still go down. In January EIA and Rystad believed US oil
production would reach 13 Mbpd in 4th Quartile 2019, the truth is this might already be below
12 Mbpd . As they told the growth in US shale have be funded by borrowed money , now
investors have far from get back what they where promissed, they are pissed off
There is no good real time data, at least not publicly available, on global stocks but US
stocks have declined so far this year ( https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W
). It seems to me that we are starting to see the effect now on lower OPEC production (cut or
whatever reasons) and LTO not growing as fast as forecasted.
A quote from IEA's last OMR (
https://www.iea.org/newsroom/news/2019/august/economic-woes-hold-sway-over-geopolitics.html
): "If the July level of OPEC crude oil production at 29.7 mb/d is maintained through 2019,
the implied stock draw in 2H19 is 0.7 mb/d, helped also by a slower rate of non-OPEC
production growth." Note that this assumes LTO-growth in US causing the market to be
oversupplied next year
The market sentiment is currently bearish on oil for whatever reason (US LTO growth,
economic slowdown, etc.), you can see this on the yield curve that Art provides, the curve
has become more flat ( https://pbs.twimg.com/media/EDENJx2XUAIR5lC.png:large
). I find the herd mentality of the oil market interesting and would not be surprised if the
herd changes direction in a not too distant future. The big question mark I see is what will
happen with the Iran-deal if/when stocks continue to decline.
Even though Norway is "the darling of alternative transport", EV sales are still a small part
of their transportation mix. All-electric 7.8%, Plug-In hybrids, 3.6%, and Hybrids 4.0%.
Without the impact of EVs, their consumption would likely have been higher.
It looks like Nick Cunningham, the author of the article below, reads peakoilbarrel.com
"The more important point is that the oil industry is slowing down more generally.
Most oil forecasters expected explosive production growth to continue through this year
and into 2020. But with June U.S. production at 12.082 mb/d, output is only about 80,000 bpd
above levels seen at the end of 2018. In other words, growth has been pretty slow this
year.
Financial stress is really setting in, forcing drillers to cut back. The rig count fell by
12 in the last week of August, part of an ongoing slide since reaching a peak late last year.
Bankruptcies are on the rise. As the Wall Street Journal notes, an estimated 26 U.S. oil and
gas companies have declared bankruptcy this year, which is close to the full-year 2018 total.
More are expected.
Worse, there is a tsunami of debt that comes due in the years ahead. According to the WSJ,
roughly $9 billion worth of debt was set to mature over the second half of 2019. But a
whopping $137 billion in debt matures between 2020 and 2022, a massive total that stems from
the huge debt issuance following the oil market meltdown a few years ago. A serious reckoning
is just around the corner."
Raymond James recently estimated that over the last three years the U.S. decline rate for oil has doubled from
1.6 to 3.2 million barrels per day. The drilled but uncompleted well inventory ("DUC") is back to normal, so the
number of wells being drilled and the number of wells being completed is now about the same. We need over 12,000 new
horizontal oil wells completed each year to hold production flat and the number of completed wells will need to go up
each year.
The U.S. Energy Information Administration ("EIA") forecast at the beginning of this year was that the U.S.
shale oil plays were just getting started and that production would increase by at least 2 million barrels of oil per
day ("MMBOPD") each year for several more years.
Now if you believe that U.S. shale production will increase by 2 million barrels per day each year for several
more years, then I have a bridge that I think you might be interested in. But let's just play "what if", or what if
it really did increase by 2 million barrels per day for the next five years.
According to the EIA's Drilling Productivity Report, December 2018 shale production, all basins, was 8,232,750
barrels per day and the legacy decline, for all basins, averaged 6.14 percent per month or 505,737 barrels per day.
Legacy decline of over one million barrels per day would be a crippling requirement of shale producers. But not to
worry, that is simply not going to happen. Now total US production did increase by two million barrels per day 2018.
In fact, according to the EI.s Monthly Energy Review, US production increased by 2,064,000 barrels per day in 2018.
But for the first 7 months of 2019, total US production has declined by 54,000 barrels per day.
USA production appears to have hit a snag. July production is now below November 2018 production.
In my opinion, legacy decline in shale production has reached a point where new production only replaces legacy
decline. In fact, legacy decline may have reached a point where it is crippling shale oil production.
Those who have followed this blog for years know that Texas oil production is reported by the Texas Railroad
Commission. But their data is very slow coming in, sometimes it is more than a year before all the data has come in.
However, Dean Fantazzini, Energy economist, Deputy Head of MSU's Chair of Econometrics and Mathematical Methods in
Economics, has developed a program that uses the vintage data to make a pretty good estimate of the actual data. His
past corrected data has been relatively accurate.
If Dr. Fantazzini's data is correct then Texas peaked in December 2018 and has declined by 280,000 by June.
All the below charts were created from the EIA's Drilling Productivity Report. The data is through September 2019
and the last few months is, of course, an estimate. Historically the estimate for those last few months has been
overestimated.
Notice the last six months is pretty much a straight line. That is because most of it is just an estimate.
It looks like the Permian is pretty much the story as far as US shale is concerned.
The Permian is now just over 50% of total US shale production.
Permian Legacy Decline has been slowly rising and now sits at about 6%.
Eagle Ford has the highest legacy decline rate, now about 8.5% per month.
It looks like shale production, outside the Permian, has pretty much hit the wall. Pay no attention to those last
four months. They are just the EIA's wild ass guess.
In conclusion: Very high legacy decline, now over 6% per month, is shale's Achilles heel. Of course, there are
other problems as well. Bankruptcies are rampant, running out of sweet spots and the price of oil is just not high
enough. It appears that the USA has peaked, or peaked until the price of oil rises at least $20 a month.
Dean's charts self correct after a couple of months. Good estimates. Red Queen is already catching up. And,
it will catch up faster the next six months from June, as most of the independents have severely cut back on
capex.
Your Wall Street journal link has a firewall. Never mind, I got through. Good post.
Pioneer has not only reduced its capex, it's reduced its workforce by 25%. Apache has given up on
the Alpine High, their biggest capex. It's 90 % gas, how stupid can you get? Yadda, yadda, Yadda. Just
google the company for capex, and put 2nd quarter 2019. Voila!
Your sure to get a positive statement from the company, but just concentrate on the capex going
forward. For example, we're losing money had over fist, translates to reduced operating expenses will
provide an increased return for 2019. Get serious. None of these companies are going to say, we are
screwed.
EOG could make it, most of the rest are totally screwed.
"I have no doubt in my mind that U.S. shale will peak, plateau and then decline like every other basin in
history," Al-Falih told reporters at OPEC's Vienna headquarters. "Until it does I think it's prudent for
those of us who have a lot at stake, and also for us who want to protect the global economy and provide
visibility going forward, to keep adjusting to it."
Dr. Raymond Pierrehumbert will be proven right belatedly.
The article does say US production still has an up side, but prices would have to be higher.
If there is
not enough supply then oil prices will obviously go higher as the did in 2003-2005 and in 2012-13.
US drilling rig count is very low at the moment being only 742, at it's highest recently the US could
have 1,400 drilling rigs working.
1,400 drilling rigs will certainly complete enough wells so new supply would exceed decline rates. When
oil prices are over $100 as they were in 2012 and the number of drilling rigs are 1,400 then you can wake me
up.
You want to focus on horizontal oil rigs. The count was as high as 1100, but many of those rigs
were lower power rigs no longer economic to operate, a lot of the current rigs are higher power and far
more efficient at drilling 3300 meter laterals commonly drilled today.
Holy f*ck Hugo, you are a raving lunatic. The oil prices can't go higher, otherwise there will be a
repeat of 2008. Clearly you are incapable of learning from the past.
Yeah, there is sort of a contradiction there. Sorry about that. But we are seeing the physical limits hit
in much of the world, regardless of the price. But if oil hits $80 to $100 a barrel, a lot more shale
could be produced. But that will not change things in the long run. It could delay peak oil by a year or
two.
Essentially we hybrids you can cut consumption in half for personal transportations. That's a
lot of oil saved. Also hybrids have much smaller battery then EV and as such use it more
efficiently.
(1) Oil fired power plants were phased out after the 1st (US peak 1970 allowed OPEC to impose
embargo) and 2nd oil crisis (peak oil in Iran 1975) not because of a planned, voluntary
transition
(2) Hirsch's slow mitigation. The 2008 oil price shock was a warning. Where are we 10 years
later? Are we on a path away from oil?
(3) EV maintenance cost must include replacement batteries in the car and in your garage (to
store power from solar panels – drive less in winter). The inverter for my solar panels
lasted only 5 years
(4) EV s recharged from grid are mainly coal power driven
(5) The era of cheap, easy oil ended in the early 2000s (when the North Sea peaked), before
the Iraq war
"EV s recharged from grid are mainly coal power driven"
Not in the USA, where coal makes up less than 25% of electricity generating capacity, down
from 40% in less than 10 years (primarily due to replacement with tight nat gas
production).
And some states, like the biggest in the country, get less than 5% electricity from coal,
imported from neighboring states via the grid.
I'm not
sure the end of homogeneity was the driver of diminished respect for what was once called
character. In the US, I hazard that a bigger factor was the widespread acceptance of
libertarian/neoliberal values. As we've documented, that world view was marketed aggressively
and very successfully by a loosely coordinated but well funded right wing campaign, whose
seminal document was the Powell Memo of 1971 which laid out the vision and many of the tactics
for their war on the New Deal and the community values that supported it. For instance, it
would have been well-nigh impossible for a Mike Milken, who'd gone to prison for securities law
violations (and was widely believed to have engaged in considerably more questionable conduct)
to have rehabilitated himself to the degree he did.
From Amar:
John McArthur, in memoriam
He was one of a kind -- and his kindness and empathy (a much used word I know) was
unbounded. It touched all from dining and custodial staff to taxi drivers. My parents apart,
few other people have had such an influence on me. (And he did me the honor of reading
everything I read: every book every article, every draft, the pages a sea of yellow
highlight)
He was also astute, ruthless and got things done. His mind was extraordinary and his
reading voracious and eclectic -- although you would never guess it from his aw shucks manner
and country bumpkin style.
I first actually talked to him in my second year as assistant professor. We had a long
long lunch at his corner table in the faculty club. We talked about everything -- except why
we were having lunch. At the end he said, "Perhaps you'd like to know why i asked you to
lunch. Well I've been reading your stuff and I wanted to put a face to the writing, to know
who this person was who was writing this stuff."
A few days later a copy of Knight's Risk Uncertainty and Profit arrived in interoffice
mail with one of John's classic handwritten notes, which went something along the following
lines. "I think this will suit the way you think of the world."
I had never encountered the book in my doctoral studies, and it was revelatory.
We had lunches, lasting 2-3 hours nearly every year for the last 20 years after I left
HBS. Always at the Charles ("If we ate at HBS there would be someone stopping by every
minute" he said. At the Charles it was only every 10 minutes. And of course he knew every
single waiter and waitress by name).
The stories he told at the lunches.. Such a pity he did not put his wisdom into a memoir.
But that was not his way.
The benefits of a "classical" education.
One of the main supports of the 'civilized' social interactions that you observe here 'Down
South' is a stubborn refusal to put a price on everything. It is not universal, but it
lingers in pockets of calm salted among the storms of modern living.
Welcome to the South.
I have some neighbors who are the opposite of me politically (in fact most of my
neighbors) but are wonderfully nice people on a personal level. Some of us who grew up here
have had the opposite experience of Yves and lived for awhile in the North where all that
politeness is dismissed as a false front.
Which in many cases it is, but the usefulness of all that unthinking social glue should
not be dismissed out of hand. After decades of elites in thrall to Ayn Rand the country may
be in need a few of those social norms that beatnik rebels in the 1950s found so stultifying.
Perhaps the most amazing thing about Epstein was how all those rich people around him thought
that his three teenager a day habit was perfectly acceptable.
I don't know anything about anything, but after living in the Northeast for my whole life
I spent 10 years in North Carolina. After a decade, I realized that I was never going
to stop being a Yankee, and that I detested "Southern courtesy" which mostly involved people
telling me to "Have a Blessed Day!"
I take part of this back: My favorite item of Southern Courtesy is that you can slander
anyone as long as you end the sentence with " bless his heart!"
Seriously, it's a different culture, and not one that I was ever comfortable with.
I see EVs and modern ICE vehicles as too complicated, even though they seem quite reliable
for a few hundred K Km. My God, even modern tire valve stems have batts and transmitters
linked to idiot displays because people are now too stupid to check their tire inflation.
Valve stem price $200 $300 per? Extrapolate to battery and propulsion software, (proprietary
software), that stops all future jobber replacement parts beyond belts and fluids.
Anyway, I have a rebuilt 1981 Westfalia that looks and runs like a dream. It is worth more
than I have invested in it, in fact it is currently worth 7X what my showroom condition 2005
GMC work truck is worth, (The truck with 150,000 Km on it and maintained to new condition).
The most complicated system on the Westie is a resistor pack "running" some intake temp
sensors to adjust mixture mix on startup. My electronic tech buddy was looking to fix a
friends jeep last week. The horn wouldn't work. He thought it was .well, a horn. No it isn't.
It is a sending unit that transits to a brain box that sends a signal to a device that says,
"Make horn noise now". Computerised, of course. My Father- in-law had some kind of Buick that
would flash the occasional warning light about a door. Price to swap out the module? $900.
Excess complexity needless complexity.
I keep seeing a modern Mad Max in my head. Instead of an insanely laughing Mel Gibson hot
wiring a fuel tanker we'll see a meter toting nerd testing leads and wires and asking if
anyone can read this damn code?
Paulo, your meter toting nerd is more likely going to be a nerd with a laptop, an OBD port
dongle and a Controller Area Network Bus (CANBUS) sniffing setup, fuming about a strange
(proprietary) implementation of the CANBUS protocol. My undestanding of the CANBUS
arrangement is that all devices are attached to the Controller Area Network (CAN) and
assigned a unique id. In the case of the friend's jeep, pressing the horn button results in a
packet being sent across the CAN addressed to the horn. All devices on the network receive
the packet but only the horn responds to it and switches on. I assume a second packet would
switch it off.
The theory is that CANBUS should allow a single network/power cable to daisy chain to all
the devices in the vehicle and control them, as opposed to having, for example, several wires
to control three speed wipers with intermittent wiping as well. It remains to be seen how
well CANBUS will stand the test of time but, it is likely to see increased adoption,
especially with EVs.
Hi Paulo,
I share your concern about vehicles becoming too complex to fix with local skill/local
machine, etc. I used to handle many repair tasks myself when younger, but things have become
a complicated spaghetti mess under hood.
And of course, this problem affects just about all kinds of vehicles built in past 3-4
decades. I'd guess well over 95% of the vehicles running around on the roads are 'fragile'
due to complexity of the systems. EV maybe less so, since there are simply less systems at
play.
A guy in Germany has over 900,000 km on a Tesla. I'm guessing he had had to have the battery
pack changed out, but didn't see that info.
Another issue along these lines is the energy supply line.
With Petrol, there a very complicated system to get the juice from the source rock to the
target tank. Such as a refinery.
That looks very fragile to me.
Reliance on that kind of complex system in a chaotic world is very risky.
The supply line for electricity can be just as complex, but just like you point out the
possibilities with the Westfalia, I point out that the electricity supply line can also be
much simpler. If you have some equipment (dry solid material with no moving parts- PV panels,
inverter, wiring/plug), your personal or local supply change for transport juice can be very
short, and durable.
"... First, rising inequality reflects the economic rents captured in resource extraction and production, whether by the owners of those resources or by financiers acting as parasitic middlemen. Second, inequality fosters the extravagant excesses that some now call plutonomy – an economic system in which a small group, the ultra-wealthy, accounts for a large share of total consumption. Under such conditions, a rising tide lifts only yachts, and competitive consumption creates an escalating pattern of what Thorstein Veblen, perhaps the greatest American economist, called conspicuous waste. Lastly, rising inequality is a good indicator of financial instability, which increases the probability of an impending crash. ..."
Rising inequality is
symptomatic of a wide range of economic and political problems that are standing in the way of
achieving a just and sustainable society. But for all the concern about the income and wealth
gap within countries in recent years, there has been surprisingly little acknowledgement of the
forces actually driving the trend.
"Sustainability" is a relatively new organizing principle in global policy. It is new partly
because economists have long been largely hostile to the very idea. Postwar neoclassical growth
theories deliberately ignored resource and environmental limits, disparaged and disdained
ecologists, and promised what was effectively impossible: perpetual growth fueled by unlimited
resources, the free disposal of wastes, and never-ending technological progress. Early warnings
– notably the Club of Rome's pathbreaking 1972 report, The Limits to Growth – were
ridiculed. More recently, the science of limits has gained acceptance, but most economists
remain preoccupied with growth.
But there is at least one dimension of unsustainability that not even economists can
overlook: inequality. Income and wealth disparities, along with other forms of inequality, are
relevant to sustainability for at least three reasons.
First, rising inequality reflects the economic rents captured in resource extraction and
production, whether by the owners of those resources or by financiers acting as parasitic
middlemen. Second, inequality fosters the extravagant excesses that some now call plutonomy
– an economic system in which a small group, the ultra-wealthy, accounts for a large
share of total consumption. Under such conditions, a rising tide lifts only yachts, and
competitive consumption creates an escalating pattern of what Thorstein Veblen, perhaps the
greatest American economist, called conspicuous waste. Lastly, rising inequality is a good
indicator of financial instability, which increases the probability of an impending crash.
For all these reasons, understanding and controlling the rise of inequality is an
ecological, socioeconomic, and political imperative. It is, in other words, a sustainability
issue.
MEASURE FOR MEASURE
To get a grip on economic inequality, we must overcome two major sources of confusion. On the
theoretical side, mainstream economics treats inequality largely as a byproduct of supply and
demand in "labor markets." It is thus regarded as a "microeconomic" phenomenon, driven on the
demand side by technological change, and on the supply side by a barely observable quantum that
goes by the name of human skill.
When economists write about policies that affect inequality, they tend to work within this
market framework. The labor market may be local, regional, or – at the very most –
national. Proposed policies focus mainly on the characteristics and capabilities of individuals
and how they can improve their positions in the market. These matters are undoubtedly
important, particularly when it comes to education and health, but they ignore the broader
"macroeconomic" forces – booms and busts, interest rates and debt, exchange rates and
commodity prices – that affect individuals, firms, economic sectors, and entire
countries.
On the empirical side, there is a question of information: What can we know from the
available data? Most of the data we have come from surveys, and most surveys focus on
households. These data are relevant for judging economic welfare – and also for thinking
about how people with different characteristics (age, gender, race, education, and so on)
interact with markets. Yet householders are not employees, and their income is not the same as
the wages paid for particular kinds of work. So, data collected on households are several steps
away from production, pay, and the forces of structural change.
When it comes to international and comparative analysis, there is yet another problem:
surveys are expensive. More surveys are conducted in stable rich countries than in unstable
poor ones. And they can be conceptually inconsistent, because the questions differ according to
the choices made by those managing the surveys. Are we measuring income? Expenditure? Before or
after tax? As with all surveys, the only answers one gets are to the questions asked.
An alternative approach that has become popular in recent years is to consult income-tax
records. But these data are even more sparse and inconsistent than surveys, and such records
are not available for all countries (indeed, not all countries have an income tax). So, in the
effort to measure inequality within countries and around the world, there has long been less
signal than noise.
INEQUALITY BY THE NUMBERS
For the past two decades, my students and I have been working on ways to address these
measurement shortcomings. We have sought out payroll records that cover a diverse range of
countries over many years, and in broadly consistent terms. With these data, we can measure
economic inequalities in the structure of pay, which then allows us to estimate the associated
inequalities of household income, both across countries and through time.
To explain the philosophy behind this approach, I often refer to a line from the American
philosopher Charles Sanders Peirce's essay "The Fixation of Belief":
Kepler undertook to draw a curve through the places of Mars [ ] and his greatest service
to science was in impressing on men's minds that this was the thing to be done if they wished
to improve astronomy; that they were not to content themselves with inquiring whether one
system of epicycles was better than another, but that they were to sit down to the figures, and
find out what the curve, in truth, was.
We have attempted to follow this advice, and we have had a fair amount of success. Our
measures have proven to be largely reliable and consistent with the existing survey record,
while also sensitive to known historical events: wars, revolutions, and the like. Moreover, we
have been able to look for patterns at the regional and even global level.
What would consistent patterns beyond the national level imply? I believe they are prima
facie evidence that the main source of change in various forms of inequality lies in
transnational developments, not in local conditions. To understand the problem of inequality,
then, we need to study common developments across a continental or even global economic
space.
As it happens, we have identified patterns showing a consistent gradient in levels of income
inequality across both space and time. If one looks across space, there are not too many
surprises. Income inequality within countries and regions rises as one moves from north to
south, reflecting the concentration of advanced industry and middle-class welfare states in
countries that were once the seats of empire. In Europe, inequality also rises as one moves
from "East" to "West," reflecting the legacy of state socialism.
Moreover, countries in close proximity, and with similar income levels and neighborly
diplomatic and trade relations, have relatively similar levels of inequality – as one can
see very clearly in maps. Common sense tells us that if they did not have similar levels of
inequality, regional migration patterns would sooner or later even things out.
Likewise, patterns of inequality change over time. In particular, there is a general
movement toward higher inequality from the 1980s until 2000, after which inequality begins to
stabilize. So far, all of this is what one would expect, which attests to the quality of the
data. Our attempt to capture a much broader picture of inequality across the world has not been
misguided.
WAVES OF INEQUALITY
These movements show, quite plainly, that levels of inequality once widely associated with the
Third World are now quite generalized globally. The First World has not become poorer, but it
has grown much less equal. There are a few exceptions, of course, and they should not come as a
surprise. Measures of inequality in Denmark or Finland, for example, are not far from where
they were a generation back. And some countries in Central and Eastern Europe – the Czech
Republic stands out – have low levels of inequality (though higher than under their
severe post-war communist regimes).
Now, consider another interesting pattern: the temporal movement of inequality within
countries is very similar to that between countries. If one takes a standard measure of
inequality between countries (not weighted for population, lest China and India dominate the
data), one finds that it has risen both between and within countries at the same time. Again,
this no surprise: rich countries comprise relatively wealthy people, whereas the people of poor
countries are poorer. In a global economy, when inequality between people changes, it is
natural that the inequalities between their respective countries change in a similar way.
But here it is important to remember that we are picking out the movement of inequality
within countries, measured separately using national statistics, and standardized by an
international statistical bureau. There are about 155 countries in our most recent data set,
and the predominant patterns across all of them tell the essential story. From 1963 to 1971, no
particular trend stands out. There is a bump in inequality within countries in 1973, followed
by a modest decline. For much of the world – for poorer countries and poorer peoples
alike, though not for the troubled rich – the 1970s were a time of growth and
progress.
Then comes a key turning point. Beginning in 1981, inequality starts rising in waves around
the world, increasing relentlessly until 2000, at which point the waves subside. In this era,
the first major wave is dominated by Latin America and Africa, and subsequent waves are driven
by the collapse of the Soviet Union and the associated regime changes in Eastern Europe.
Finally, economic liberalization in Asia fuels another wave that culminates in the 1997 Asian
financial crisis. From 2000, the rise in inequality slows, and inequalities even decline in
parts of the world, including Latin America, China, and the Russian Federation.
A TALE OF FINANCIAL HISTORY
The message contained in these numbers is neither subtle nor obscure. This is a story about the
relationship between debtors and creditors in the world economy. Under the post-World War II
Bretton Woods framework, stability prevailed – until the system collapsed in 1971, when
the United States ended the dollar's convertibility into gold. In 1973, the oil shock and a
commodity boom led to a surge in credit in Latin America and elsewhere as countries took on
commercial-bank debt to sustain growth in the face of higher fuel prices. As developing
countries grew, their middle classes expanded and inequalities declined.
All of that ended in 1981 with the start of a worldwide debt crisis that emanated from
monetary-policy changes in the US, where interest rates shot up to 22%. No longer able to pay
their debts, developing countries were forced to pursue austerity measures and to abandon their
independent industrial development strategies. Commodity prices collapsed, as did the Soviet
bloc – much of it heavily indebted – a decade later. The Asian crisis of 1997
rounded out this period.
Inequality at the global level peaked in 2000. In the wake of the dot-com bust and the
attacks of September 11, 2001, the US Federal Reserve cut interest rates, and China, growing
strongly and now a member of the World Trade Organization, increased its commodity purchases
worldwide. Prices and credit conditions improved, and for a while global inequality stopped
rising.
The trends in inequality over this period are in keeping with the commonsense insights of
Simon Kuznets back in 1955. Kuznets surmised that inequality would rise sharply during the
initial stages of economic development, and then decline at later stages. China and India
reflect this pattern, but for other developing countries in Asia and Latin America,
industrialization and urbanization have been far enough advanced for decades that rapid growth
reduces inequality and depression increases it. In a very few rich countries – notably
the US and the United Kingdom – rapid growth increases inequalities, because it
concentrates income in globally dominant sectors, especially finance and high technology.
So, in the rough history presented above, there are two key elements to consider: the
structure of the underlying economies and the effects of booms and busts on that structure.
Global forces for boom and bust have tended to affect individual countries and their people in
proportion to their ability to resist them. Countries with strong institutions that were able
to maintain independence and manage their own affairs fared the best. Those that could not
defend themselves against global forces were periodically ravaged by them. In our time, this is
the difference between, say, China and Mexico.
These global forces can be identified by the big turning points. The first was the breakdown
of Bretton Woods and the rush to private debt in the 1970s. The second was the debt crisis of
the 1980s, which was followed by the collapse of oil and commodity prices, and then of
Soviet-style socialist governments, and then by liberalization in Asia, culminating in the 1997
crisis – but not in China, which was poised for another decade of double-digit growth.
The third big turning point occurred in 2000, when lower interest rates, higher commodity
prices, and modest advances in social-welfare policies and national economic development
strategies helped to reduce inequality and poverty in Latin America and Russia, while in China,
too, inequalities peaked and started to decline.
In Europe, events played out somewhat differently. European countries did not reject
neoliberal ideology and re-embrace social-welfare policies after 2000. The introduction of the
euro was followed by nearly a decade of easy credit terms, which fueled a boom in housing and
commercial construction in Spain, Ireland, Portugal, and Greece (where the boom included the
2004 Olympics, among other projects). This period was not unlike the 1970s in Latin America.
But as Herbert Stein, a chairman of the White House Council of Economic Advisers under Richard
Nixon and Gerald Ford, famously observed, "If something cannot go on forever, it will stop." In
2009, the global financial crisis brought the happy early days of the euro to an abrupt
end.
REIN IT IN
What the available evidence demonstrates is that economic inequality has been regulated over
time by the behavior of global finance. The data even show that changes in levels of inequality
within the smaller, open economies are closely related to exchange-rate movements. When
currencies become overvalued, their countries are vulnerable to Dutch disease – eroding
the competitiveness of industry – and to financial crisis. Financial crises and
devaluations quickly reestablish the high level of inequality that human-development programs
were meant to overcome.
Inequality is thus irreducibly a global and, contrary to what many economists like to think,
macroeconomic issue. Labor-market considerations are secondary, crowded out by the dominant
macro movements described above. As such, the only way to address inequality effectively is to
bring the forces of financial instability, debt peonage, and predatory austerity under control.
These forces can be tempered by financial regulation, a function of rich-country governments
and central banks. But regulators are of course subject to capture by big finance, and
central-bank mandates – whether to target full employment or only price stability –
were drafted in an age of national economic policymaking. National central banks – as
also the European Central Bank – are not set up to consider their policies' effects on
peoples beyond their jurisdictional boundaries.
To be sure, there is still much that nation-states around the world can do to fight
inequality when conditions permit. Useful measures include raising the minimum wage,
strengthening trade unions, establishing social-insurance schemes, and building infrastructure
and providing public goods. The problem is that these forms of progress can be – and
regularly are – erased by financial crises and the subsequent imposition of severe
austerity. This means that the capacity to reduce inequalities sustainably depends on the
capacity for insulation from external financial pressures. However difficult it may be, the
rest of the world needs to protect itself from the destabilizing forces of global finance.
In short, economic inequality is tied to the most unstable and unsustainable element of the
world system, which is global finance. Achieving anything sustainably – especially, but
not only, the reduction of extreme inequalities – requires a financial order that is
broadly reformed and that can once again serve as a tool for other institutions and purposes,
and not as their self-serving master. This is particularly important as humanity turns toward
that other, more critical goal: the sustainability of human life on this planet. Global
financial stability is a necessary step on the way to a clean-energy economy – as
envisioned in the Green New Deal and similar proposals. At the end of the day, if we want to
have a sustainable and civilized future, we need to get a grip on global finance.
James K.
Galbraith is Chair in Government/Business Relations at the Lyndon B. Johnson School of Public
Affairs, University of Texas at Austin. His most recent books are Inequality: What Everyone
Needs to Know and Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of
Europe.
Its just from slow growth and the Boomer deleveraging era. Its a global phenom and its
impacts are global into the cultural realm. The college degree boom is a great example of
this phenom. It was really based on the surge in consumer debt boom after WWII boosting these
supply chains in the US to increased consumption to GDP and reduced manufacturing, which fell
in real terms during the 1950-2000 period.
This created traditionally required college degree jobs into a nexus that was originally
based around the Baby Boomer generation and strengthened afterwards. Once growth petered in
2007(and we developed a oversupply since 2000) we now have too many people with college
degrees.
Even the rich aren't as rich as they were in 2007. Real profits are struggling this cycle
and are showing up with weak job growth this year. The unemployment rates flaws are showing
up this cycle as well, as total numbers mean little compared historically than the potential
that is lowest unemployment can go.
Based on that, the current level of labor market saturation seems to be at a late 70's
cycle level. In otherwards, if you adjust the population growth and total size this cycle is
doing no better than the Carter era top in 1979 .then we see the whining.
Both the Reagan and Bush II era expansions were a bit better and probably onto a intro of
a "boom".
Obviously it is noticeably the Korean, Vietnam and Tech era booms which would require
unemployment to fall below 3% to reach, maybe down to 2.5%, which tells you something about
potential unemployment drop peaks.
As it translated into similar impulses in internal policy, which led to neoliberalism and
restoration of the rule of fiancial oligarchy within the USA. The USA experiment with democracy
was actually over in 1945
'Sanders has said that we live in a "corrupt political system designed to protect the
wealthy and the powerful." Warren said it's a "rigged system that props up the rich and
powerful and kicks dirt on everyone else."'
Yet the rest of the article focuses almost entirely on internal US shenanigans. When it comes
to protecting wealth and power, George Kennan hit the nail on the head in 1948, with "we have
about 50% of the world's wealth but only 6.3 of its population. This disparity is
particularly great as between ourselves and the peoples of Asia. In this situation, we cannot
fail to be the object of envy and resentment. Our real task in the coming period is to devise
a pattern of relationships, which will permit us to maintain this position of disparity."
This, which has underpinned US policy ever since, may not be corrupt in the sense of
illegal, but it certainly seems corrupt in the sense of morally repugnant to me.
Approaching from the opposite direction, if someone were to say "I sincerely believe that
the USA has the most open & honest political system and the fairest economic system in
human history" would you not think that person to be incredibly naive (or, cynically, a
liar)?
There has been, for at least the last couple of decades. a determined effort to do away
with corruption – by defining it away. "Citizens United" is perhaps the most glaring
example but the effort is ongoing; that Weiner op-ed is a good current example.
Shinola, I'm reminded of the statement "Raymond Shaw is the kindest, bravest, warmest,
most wonderful human being I've ever known in my life." in the movie Manchurian
Candidate . Much of what is said today just pops out as prepackaged propaganda.
It was possible twenty, thirty, forty years ago to make a reasonable case that the federal
government, as well as many of the state and municipal ones, were fairly honest and
functional. It is still possible that the writer believes what he wrote, but I think saying
that the belief that our system is rigged is mere irresponsible cynicism is at best an
example of charming naïveté and more likely cynical propagandistic fiction
itself.
"... Fortunately, we have some help. Adam Tooze is a prize-winning British historian, now at Columbia University, whose histories of WWII ( The Wages of Destruction ) – and of WWI ( The Deluge ) tell a story of 100 years of spiraling; 'pass-the-parcel' global debt; of recession (some ideologically impregnated) , and of export trade models, all of which have shaped our geo-politics. These are the same variables, of course, which happen to be very much in play today. ..."
"... But first, as Tooze notes, the 'pattern' starts with Woodrow Wilson's observation in 1916, that "Britain has the earth, and Germany wants it". Well, actually it was also about British élite fear of rivals (i.e. Germany arising), and the fear of Britain's élites of appearing weak. Today, it is about the American élite fearing similarly, about China, and fearing a putative Eurasian 'empire'. ..."
"... The old European empires effectively 'died' in 1916, Tooze states: As WWI entered its third year, the balance of power was visibly tilting from Europe to America. The belligerents simply could no longer sustain the costs of offensive war. The Western allies, and especially Britain, outfitted their forces by placing larger and larger war orders with the United States. By the end of 1916, American investors had wagered two billion dollars on an Entente victory (equivalent to $560 billion in today's money). It was also the year in which US output overtook that of the entire British Empire. ..."
"... Wilson was the first American statesman to perceive that the United States had grown, in Tooze's words, into "a power unlike any other. It had emerged, quite suddenly, as a novel kind of 'super-state,' exercising a veto over the financial and security concerns of the other major states of the world." ..."
"... "Americans, meanwhile, were preoccupied with the problem of German recovery. How could Germany achieve political stability if it had to pay so much to France and Belgium? The Americans pressed the French to relent when it came to Germany, but insisted that their own claims be paid in full by both France and Britain. Germany, for its part, could only pay if it could export, and especially to the world's biggest and richest consumer market, the United States. The depression of 1920 killed those export hopes. Most immediately, the economic crisis sliced American consumer demand precisely when Europe needed it most." ..."
"... Britain actually chose the course of deflation and austerity. Pretty much everybody else however, chose to devalue their currency (relative to gold), instead. But American leaders of the 1920s weren't willing to accept this outcome . They did not want their industry and markets disturbed by a flood of cheap French and German products. In 1921 and 1923 – just as today in respect to China – America raised tariffs, terminating a brief experiment with freer trade undertaken after the election of 1912. "The world owed the United States billions of dollars, but the world was going to have to find another way of earning that money than selling goods to the United States". ..."
"... "Between 1924 and 1930, world financial flows could be simplified into a daisy chain of debt. Germans borrowed from Americans, and used the proceeds to pay reparations to the Belgians and French. The French and Belgians, in turn, repaid war debts to the British and Americans. The British then used their French and Italian debt payments to repay the United States, who set the whole crazy contraption in motion again. Everybody could see the system was crazy." Only the United States could fix it. It never did. ..."
"... The flip side to this fixation with a dollar "as good as gold" was not just the inter-war hardship of a war-ravaged Europe, but also the threat of American markets flooded with low-cost European imports: German steelmakers and shipyards underpricing their American competitors with weak marks. Such a situation also prevailed after World War II when the US acquiesced in the undervaluation of the Deutsche mark and yen precisely to aid German and Japanese recovery. ..."
"... Hitler dreamed of conquering Poland, Ukraine, and Russia as a means of gaining the resources to match those of the United States, Tooze argues. "The vast landscape in between Berlin and Moscow would become Germany's equivalent of the American West". Hitler's original aim, Tooze suggests, was more that of a highly modernised and industrial first Reich – a Carolingian 'empire', such as that instigated by the Franks after the Fall of Rome. ..."
"... Although configured differently, the German National Socialist dream of a 'modern' Caroligian empire still underpins an EU vision of Europe today, as its lineal descendent. ..."
"... It is precisely this paradox on which Trump has 'zeroed-in', in order to mobilise his base towards a new view of Europe, as a predatory trade rival. The US, faced by a rising China, is retrenching into a Hobbesian world where hard 'power' is paramount, and will thus be increasingly unsympathetic to European liberal, moral-concern narratives. ..."
"... Here is the point: The EU initially would never have come into being, without America's covert political engineering . And Europe was, (and still is), consequently founded on the premise of unreserved US benignity towards the EU. But that key premise no longer holds: Can a Europe on the cusp of recession successfully manage to balance away from a US now focused on trade war toward Eurasia? ..."
"... A substantive global recession may set the whole 'crazy debt contraption' in motion again. But this time, amplified by a collapsing oil price, toppling Middle Eastern states, etc. Everybody can see the system is crazy. The United States could fix it, but it never will. ..."
"... It has weaponised the financial system so thoroughly that the US will never yield on the dollar status. The question is, do China and Russia have the political will – and capability – to assume the task of mounting a different financial order? ..."
"... In 1916, the US output surpassed that of the entire British Empire. Ninety-eight years later, US output supremacy (in PPP terms) came to an end. China surpassed America. Will a more fractured, increasingly belligerent US domestic polity be able to fix the financial order, as the latter careers from one extreme to a disordered, sanctioned and tariffed other? America most likely, will once again be wedded to a "conservative" [i.e. Hobbesian] vision of pursuing its own future. ..."
Is the
prospect of looming global recession merely an economic matter, to be discussed within the
framework of the Great Financial Crisis of 2008 – which is to say, whether or not, the
Central Bankers have wasted their available tools to manage it? Or, is there a wider pattern of
geo-political markers that may be deduced ahead of its arrival?
Fortunately, we have some help. Adam Tooze is a prize-winning British historian, now at
Columbia University, whose histories of WWII ( The Wages of
Destruction ) – and of WWI (
The Deluge ) tell a story of 100 years of spiraling; 'pass-the-parcel' global
debt; of recession (some ideologically impregnated) , and of export trade models, all of which
have shaped our geo-politics. These are the same variables, of course, which happen to be very
much in play today.
Tooze's books describe the primary pattern of linked and repeating events over the two wars
– yet there are other insights to be found within the primary pattern: How modes of
politics were affected; how the idea of 'empire' metamorphosed; and how debt accumulations
triggered profound shifts.
But first, as Tooze notes, the 'pattern' starts with Woodrow Wilson's observation in 1916,
that "Britain has the earth, and Germany wants it". Well, actually it was also about British
élite fear of rivals (i.e. Germany arising), and the fear of Britain's
élites of appearing weak. Today, it is about the American élite fearing
similarly, about China, and fearing a putative Eurasian 'empire'.
The old European empires effectively 'died' in 1916, Tooze states: As WWI entered its third
year, the balance of power was visibly tilting from Europe to America. The belligerents simply
could no longer sustain the costs of offensive war. The Western allies, and especially Britain,
outfitted their forces by placing larger and larger war orders with the United States. By the
end of 1916, American investors had wagered two billion dollars on an Entente victory
(equivalent to $560 billion in today's money). It was also the year in which US output overtook
that of the entire British Empire.
The other side to the coin was that staggering quantity of Allied purchases called forth
something like a war mobilization in the United States. American factories switched from
civilian to military production. And the same occurred again in 1940-41. Huge profits resulted.
Oligarchies were founded; and America's lasting interest in its outsize military-security
complex was founded.
Wilson was the first American statesman to perceive that the United States had grown, in
Tooze's words, into "a power unlike any other. It had emerged, quite suddenly, as
a novel kind of 'super-state,' exercising a veto over the financial and security concerns
of the other major states of the world."
Of course, after the war – there was the debt. A lot of it. France "was deeply in
debt, owing billions to the United States and billions more to Britain. France had been a
lender during the conflict too, but most of its credits had been extended to Russia, which
repudiated all its foreign debts after the Revolution of 1917. The French solution was to exact
reparations from Germany".
"Britain was willing to relax its demands on France. But it owed the United States even more
than France did. Unless it collected from France -- and from Italy and all the other smaller
combatants as well -- it could not hope to pay its American debts."
"Americans, meanwhile,
were preoccupied with the problem of German recovery. How could Germany achieve political
stability if it had to pay so much to France and Belgium? The Americans pressed the French to
relent when it came to Germany, but insisted that their own claims be paid in full by both
France and Britain. Germany, for its part, could only pay if it could export, and especially to
the world's biggest and richest consumer market, the United States. The depression of 1920
killed those export hopes. Most immediately, the economic crisis sliced American consumer
demand precisely when Europe needed it most."
Wars are frequently followed by economic downturns, but in 1920-21, US monetary authorities
actually sought to drive prices back to their pre-war levels through austerity. They engineered
a depression. They did not wholly succeed, but they succeeded well enough. When the US opted
for massive deflation, it thrust upon every country that wished to return to the gold standard,
an agonizing dilemma. Return to gold at 1913 values, and you would have to match US deflation
with an even steeper deflation of your own – and accept mass unemployment as the
consequence – or devalue.
Britain actually chose the course of deflation and austerity. Pretty much everybody else
however, chose to devalue their currency (relative to gold), instead. But American leaders of
the 1920s
weren't willing to accept this outcome . They did not want their industry and markets
disturbed by a flood of cheap French and German products. In 1921 and 1923 – just as
today in respect to China – America raised tariffs, terminating a brief experiment with
freer trade undertaken after the election of 1912. "The world owed the United States billions
of dollars, but the world was going to have to find another way of earning that money than
selling goods to the United States".
That way was found: (you can guess it) – more debt. Germany resorted to the printing
press. (Printing money was the only way Germany could afford to rearm in anticipation of the
WWII sequel to the First WW). The 1923 hyper-inflation that wiped out Germany's savers, however
also tidied up the country's balance sheet. Post-inflation Germany looked like a very
creditworthy borrower.
"Between 1924 and 1930, world financial flows could be simplified into a daisy chain of
debt. Germans borrowed from Americans, and used the proceeds to pay reparations to the Belgians
and French. The French and Belgians, in turn, repaid war debts to the British and Americans.
The British then used their French and Italian debt payments to repay the United States, who
set the whole crazy contraption in motion again. Everybody could see the system was crazy."
Only the United States could fix it. It never did.
Why? Because "[a]t the hub of the rapidly evolving, American-centered world system, there
was a polity wedded to a conservative vision of its own future" [as global hegemon], Tooze
opines .
The flip side to this fixation with a dollar "as good as gold" was not just the inter-war
hardship of a war-ravaged Europe, but also the threat of American markets flooded with low-cost
European imports: German steelmakers and shipyards underpricing their American competitors with
weak marks. Such a situation also prevailed after World War II when the US acquiesced in the
undervaluation of the Deutsche mark and yen precisely to aid German and Japanese recovery.
Fast forward to today – and here lies the root of Trump's economic Zeitgeist. The US
fear has returned in a new iteration: America's global primacy is being overtaken, this time by
China.
The austerity of the 1920s, and the depression that followed, eviscerated governments
throughout Europe. Yet the dictatorships that replaced them were not, as Tooze emphasizes in The Wages of Destruction , reactionary absolutisms; rather, they aspired to be
modernizers. And none more so, than Adolf Hitler. Tooze writes: "The originality of National
Socialism was that, rather than meekly accepting a place for Germany within a global economic
order dominated by the affluent English-speaking countries, Hitler sought to mobilize the
pent-up frustrations of his population to mount an epic challenge to this order.
Hitler dreamed of conquering Poland, Ukraine, and Russia as a means of gaining the
resources to match those of the United States, Tooze argues. "The vast landscape in between
Berlin and Moscow would become Germany's equivalent of the American West". Hitler's original
aim, Tooze suggests, was more that of a highly modernised and industrial first Reich – a
Carolingian 'empire', such as that instigated by the Franks after the Fall of Rome.
Although configured differently, the German National Socialist dream of a 'modern'
Caroligian empire still
underpins an EU vision of Europe today, as its lineal descendent.
After WWII, a weakened, and chastened Europe definitively turned away from raw 'power'; or
to put it a little differently, it moved beyond power towards a different style of
'empire'. Still Carolingian in essence – that is, with a centralized command (in the
Frankish style), overseeing a self-contained world of laws and rules and tightly regulated
cooperation.
But, with the post-war ethos of 'never again', it evolved into a millenarian project,
grounded in Kant's
'Perpetual Peace' – and of his 'compelling' logic of global governance as the only
solution to the brutal politics of Hobbesian anarchy, (though Kant also feared that the "state
of universal peace" made possible by world government would be an even greater threat to human
freedom than the Hobbesian international order, inasmuch as such a government, with its
monopoly of power, would become "the most horrible despotism").
So, Europe lives a "postmodern system" that does not rest on a balance of power, but on "the
rejection of force" and on "self-enforced rules of behaviour". In the "postmodern world,"
wrote Robert
Cooper (himself a senior EU official): "raison d'état and the amorality of Machiavelli's
theories of statecraft have been replaced by a moral consciousness" in international
affairs.
The result is a paradox. The US solved the 'Kantian paradox' for the EU of its Liberal
rejection of power politics through providing security, which rendered it unnecessary for
Europe's supranational government to provide it. Europeans did not need power to achieve peace,
and neither have they needed power to preserve it.
It is precisely this paradox on which Trump has 'zeroed-in', in order to mobilise his base
towards a new view of Europe, as a predatory trade rival. The US, faced by a rising China, is
retrenching into a Hobbesian world where hard 'power' is paramount, and will thus be
increasingly unsympathetic to European liberal, moral-concern narratives.
Here is the point: The EU initially would never have come into being, without America's
covert political engineering . And Europe was, (and still is), consequently founded on the
premise of unreserved US benignity towards the EU. But that key premise no longer holds: Can a
Europe on the cusp of recession successfully manage to balance away from a US now focused on
trade war toward Eurasia?
What might a looming recession then portend? The pendulum will (almost certainly) now swing
to the other extreme from the 1920s. Trump is a zero-interest, bail-out man. But this extreme
swing in the opposite direction, however, is likely induce similar rounds of 'daisy-chain'
sloughing-off of toxic debt onto someone – anyone – else; of competitive
devaluation, and attempted deflation-export.
A substantive global recession may set the whole 'crazy debt contraption' in motion again.
But this time, amplified by a collapsing oil price, toppling Middle Eastern states, etc.
Everybody can see the system is crazy. The United States could fix it, but it never will.
It has weaponised the financial system so thoroughly that the US will never yield on the
dollar status. The question is, do China and Russia have the political will – and
capability – to assume the task of mounting a different financial order?
Why did the US not fix the system in the inter-war years? Because, Tooze tells us (in coded
terms), the system had proved a gold-mine for the weapons-manufacturing oligarchs, and America
was mightily taken with the unfolding prospect of its leading the world: the 'American century'
ahead.
Also, before WWI, Tooze writes in The Deluge , the ability of the US to act was
hindered by its ineffective political system; dysfunctional financial system, and uniquely
violent racial and labor conflicts. "America was a byword for urban graft, mismanagement and
greed-fuelled politics, as much as for growth, production, and profit".
Well the two 'world wars' – as principal weapons' provider – did not make that
situation much better. Oligarchic fortunes and influence blossomed. The interwar years saw the
intersection of certain oligarchic interests with that of organized crime in America, and WWII
saw
the linking of the Italian mafia into US foreign operations – and thus to the US
political class.
In 1916, the US output surpassed that of the entire British Empire. Ninety-eight years
later, US output supremacy (in PPP terms) came to an end. China surpassed America. Will a more
fractured, increasingly belligerent US domestic polity be able to fix the financial order, as
the latter careers from one extreme to a disordered, sanctioned and tariffed other? America
most likely, will once again be wedded to a "conservative" [i.e. Hobbesian] vision of pursuing
its own future.
a farmer has at least 3 PhD qualifications just to contend in the business
No need for a tongue-in-cheek, you're on track, if manufacturing food is akin to other
manufacturing.
. . .from last year
August 2018, The fall of employment in the manufacturing sector
Today's manufacturing output is at least 5 percent greater than it was in 2000, but it has
become much more capital intensive and much less labor intensive. Accordingly, workers in
the sector are more likely to have at least some college education than their counterparts
of years past. But there are far fewer manufacturing workers overall, with about 7.5
million jobs lost since 1980.
What is most responsible for the manufacturing job losses? Rising trade with China is often
cited as a possible culprit. But competition from China only accounts for about a fourth of
the decline in manufacturing during the 2000s. This theory is further eroded by the fact
that local markets that did not compete with Chinese imports also saw employment
declines.
A skills mismatch -- the gap between the skills workers have and the skills employers need
-- has also contributed to the decline of manufacturing employment.
Prime age men and women with less than a high school degree have been hit particularly hard
by changes to manufacturing employment. As the manufacturing sector has shifted from
low-skilled to high-skilled work, workers who possess higher skill levels (e.g., engineers,
computer programmers, software developers, etc.) have become more sought after than before.
. . here
And the US supply of STEM graduates for any technical profession seems to be wanting.
Meanwhile we must recognize that employment is not directly tied to the economy, given
mechanization.
"... What has caused the rapid decline in US manufacturing employment in recent decades? This column uses novel data to investigate the role of US multinationals and finds that they were a key driver behind the job losses. Insights from a theoretical framework imply that a reduction in the costs of foreign sourcing led firms to increase offshoring, and to shed labour." [link above] ..."
"... It looks like 'free' trade fundamentalists like Krugman are going to have to revisit their ideology... ..."
"... How pathetic can Democrats get with thier anti-worker policies ..."
"... Late 90's US corporations went whole in to industrializing [extreme low wage] China... FOREX, federal deficits, ignoring the US worker, etc. were in the [sympathetic] mix. There is a chicken, which egg is not important. ..."
"... Personally, I think that Trump is exploiting the distress of the working stiff and not doing anything for him. Meanwhile, the Democratic leadership has shown callous indifference toward the working stiff so Trump gets their votes, because at least he will acknowledge that there's a problem unlike kurt and his ilk. ..."
"A new assessment of the role of offshoring in the decline in US manufacturing employment,"
by Christoph Boehm, Aaron Flaaen, Nitya Pandalai-Nayar 15 August 2019 What has caused the rapid decline in US manufacturing employment in recent decades? This
column uses novel data to investigate the role of US multinationals and finds that they were
a key driver behind the job losses. Insights from a theoretical framework imply that a
reduction in the costs of foreign sourcing led firms to increase offshoring, and to shed
labour." [link above]
It looks like 'free' trade fundamentalists like Krugman are going to have to revisit
their ideology...
As for kurt, expect him to continue to deny the fact that 'free' trade has cost a
significant number of jobs and caused enough economic disruption to tilt the election to
Trump in 2016.
Further, expect the Democratic leadership to continue to tout the benefits of 'free' trade
without acknowledging its severe adverse effects, both economically and politically. And of
course, as long as they never acknowledge the adverse effects, they will never have to
address it which will allow Trump to continue to bludgeon them on the issue.
How pathetic can Democrats get with thier anti-worker policies
Late 90's US corporations went whole in to industrializing [extreme low wage] China...
FOREX, federal deficits, ignoring the US worker, etc. were in the [sympathetic] mix. There is
a chicken, which egg is not important.
The US worker lost in the evolutions. Aside from Trump who has tried anything for the US
working stiff?
Personally, I think that Trump is exploiting the distress of the working stiff and not
doing anything for him. Meanwhile, the Democratic leadership has shown callous indifference
toward the working stiff so Trump gets their votes, because at least he will acknowledge that
there's a problem unlike kurt and his ilk.
"... "The US economy is dominated by services, such as finance, healthcare, information services (such as telecoms), professional services (such as computer programming, lawyering, and engineering), housing, and myriad others. And despite the manufacturing slowdown, services are growing at a solid pace. About 70% of what consumers spend their money on is on services, leaving the US as the cleanest dirty shirt." ..."
"... How about this: a good number of the "services" are so parasitic that it cuts down on not only the desire but the ability to buy goods. ..."
"... automobiles have become as expensive as were homes thirty years ago. Those prices have gone up. Wages have stagnated and now are regressing as a function of purchasing power. ..."
That this
year-over-year decline is still so tame, despite the explosive trade-war rhetoric, pandemic
threatened and actual tit-for-tat tariffs, and even tech embargos, is largely due to companies
having found ways to brush off the rhetoric, dodge some of the tariffs, shift parts of their
supply chains around, or push up the tariffs into their supply chains.
By comparison, what happened during the Global Financial Crisis was a "collapse" of world
trade when companies – uncertain if the banking system would still stand the next day
– shut down their ordering process. This was when American consumers lost their jobs by
the millions and curtailed their spending, and when car sales collapsed. From September 2008
through the trough in May 2009, the World Trade Monitor index had plunged 17.5%.
But so far in 2019, there are no signs that the American consumer has pulled back. And
despite the trade war, the index has declined only 3.1% so far from the one-month peak.
The US economy is dominated by services, such as finance, healthcare, information services
(such as telecoms), professional services (such as computer programming, lawyering, and
engineering), housing, and myriad others. And despite the manufacturing slowdown, services are
growing at a solid pace. About 70% of what consumers spend their money on is on services,
leaving the US as the cleanest dirty shirt.
China.
China is experiencing a slowdown in exports that started last fall. In recent years, exports
continued to rise from September through June. But not this time. Exports to the rest of the
world fell 3.5% from September 2018 through June 2019, according to the World Trade Monitor
data for China, which I converted to a three-month moving average to smoothen out the vary
large month-to-month ups and downs of the data. The regular spikes in the chart are related to
the Chinese New Year. Note the 24% plunge during the Financial Crisis:
"The US economy is dominated by services, such as finance, healthcare, information
services (such as telecoms), professional services (such as computer programming, lawyering,
and engineering), housing, and myriad others. And despite the manufacturing slowdown,
services are growing at a solid pace. About 70% of what consumers spend their money on is on
services, leaving the US as the cleanest dirty shirt."
That is one way to interpret what is happening. How about this: a good number of the
"services" are so parasitic that it cuts down on not only the desire but the ability to buy
goods.
The author might make a connection between new auto sales and GDP, but here "in the
trenches," disposable income has been draining off into higher than wage growth inflation in
basic services and healthcare costs. Who can afford a new car when surprise medical bills
absorb the resources once earmarked for long term durable domestic goods? Plus, automobiles
have become as expensive as were homes thirty years ago. Those prices have gone up. Wages
have stagnated and now are regressing as a function of purchasing power.
So we are a banking crisis away from that wile e coyote chart move? DB, looking at you.
Until then we sing the stagflation chops (but there is no inflation, right, wages stagnate as
prices rise).
How else do we end the automobile economy? Seems like this "slowdown" is going about it
very gingerly. We'll still be driving cars for the next decades, just fewer of them. In order
to really but the brakes on we have to create a viable alternative. Which we can do, but we
don't seem willing to offer the alternative until the use of cars has been subdued. Are we
letting commuters down slowly or are we letting the oil industry down slowly, so as not to
topple the entire manufacturing scaffold of the world economy?
This will be a paradigm shift in the American socio-political system. Since at least the
First World War period, the hallmark of American culture has been personal mobility. First
with trains, and later with automobiles, the average American could relatively easily pull up
stakes and move off to some perceived better place. Prior to this, most people were
constrained in their movements by the modes of transport, and the relative costs of those
movement systems. Rural people who had never been farther than the local county courthouse
town were the norm. A radical relocalization is in the offing.
"... Europe and Japan are currently caught in what might be called a monetary black hole – a liquidity trap in which there is minimal scope for expansionary monetary policy ..."
"... "There are strong reasons to believe that the capacity of lower interest rates to stimulate the economy has been attenuated – or even gone into reverse." Good to see that some prominent economists are finally willing to say what I've been pointing out for the past five years. ..."
"... A much better idea for central banking, negotiate the seigniorage fee, up front, then let the central banker do its thing with no interference until the contract expires. Just admit, upfront, central bankers are a creation of government, serve government, let's at least do it twice as efficient as the boomers done it. Screw up half as often! Why not! ..."
Whither Central Banking?
In an environment of secular stagnation in the developed economies, central bankers'
ingenuity in loosening monetary policy is exactly what is not needed. What is needed are
admissions of impotence, in order to spur efforts by governments to promote demand through
fiscal policies and other means.
By LAWRENCE H. SUMMERS and ANNA STANSBURY
CAMBRIDGE – The world's central bankers and the scholars who follow them are having
their annual moment of reflection in Jackson Hole, Wyoming. But the theme of this year's
meeting, "Challenges for Monetary Policy," may encourage an insular – and dangerous
– complacency.
Simply put, tweaking inflation targets, communications strategies, or even balance sheets
is not an adequate response to the challenges now confronting the major economies. Rather,
ten years of below-target inflation throughout the developed world, with 30 more expected by
the market, and the utter failure of the Bank of Japan's extensive efforts to raise inflation
suggest that what was previously treated as axiomatic is in fact false: central banks cannot
always set inflation rates through monetary policy.
Europe and Japan are currently caught in what might be called a monetary black hole
– a liquidity trap in which there is minimal scope for expansionary monetary
policy . The United States is one recession away from a similar fate, given that, as the
figure below illustrates, there will not be nearly sufficient room to cut interest rates when
the next downturn comes. And with ten-year rates in the range of 1.5% and forward real rates
negative, the scope for quantitative easing and forward guidance to provide incremental
stimulus is very limited – even assuming that these tools are effective (which we
doubt).
These developments seem to lend further support to the concept of secular stagnation;
indeed, the issue is much more profound than is generally appreciated. Relative to what was
expected when one of us (Summers) sought to resurrect the concept in 2013, deficits and
national debt levels are far higher, nominal and real interest rates are far lower, and yet
nominal GDP growth has been far slower. This suggests some set of forces operating to reduce
aggregate demand, whose effect has only been partly attenuated by fiscal policies.
Conventional policy discussions are rooted in the (by now old) New Keynesian tradition of
viewing macroeconomic p
