Softpanorama
May the source be with you, but remember the KISS principle ;-)

Contents Bulletin Scripting in shell and Perl Network troubleshooting History Humor

Audacious Oligarchy and "Democracy for Winners"

Oligarchic "Quiet Coup" in the USA, "Greed is good" slogan and loss of trust in neoliberal governments

News Elite [Dominance] Theory And the Revolt of the Elite Recommended Links Quiet coup The Deep State National Security State / Surveillance State In Goldman Sachs we trust: classic example of regulatory capture by financial system hackers
Neoliberalism as a New Form of Corporatism Two Party System as polyarchy The Iron Law of Oligarchy The Pareto Law Media-Military-Industrial Complex Groupthink Bureaucracy as a Political Coalition
Corporatism Inverted Totalitarism US and British media are servants of security apparatus Casino Capitalism Ayn Rand and Objectivism Cult Amorality and criminality of neoliberal elite Corruption of Regulators
Neoliberal Brainwashing: Journalism in the Service of the Powerful Few The Guardian Slips Beyond the Reach of Embarrassment The importance of controlling the narrative New American Caste System The Essential Rules for Dominating Population What's the Matter with Kansas Big Uncle is Watching You
Nation under attack meme American Exceptionalism Neo-fascism Bureaucracies Military Bureaucracy Military Incompetence Bureaucratic Collectivism
Toxic Managers The psychopath in the corner office Female Sociopaths Office Stockholm Syndrome Quotes about Psychopaths Humor Etc


Introduction


There is an 'audacious oligarchy' of self-defined rulers who move freely between private industry and government, whose primary objective is preserving and furthering their own power and self-interest.

Jesse's Café Américain, Audacious Oligarchy

Audacious behaviour is often connected with the weakened self-preservation instinct, typical for sociopaths. So their audacity take the form of Chutzpah (shameless audacity; impudence, unmitigated effrontery or impudence; gall). It's inherently connected with the lack of empathy, which is a defining feature of sociopaths. The key question here is: to what extent the US elite became infected with substantial or even dominant number of sociopaths? Including female sociopaths as we saw recently in the reaction of behaviour of a wife of former president on killing Gaddafy (Hillary Clinton on Gaddafi: We came, we saw, he died ) ?

In fact this process of self-selection of sociopaths into neoliberal elite reached dangerous level was noted be many, including famous remark of Robert Johnson at Culture Project's IMPART 2012 Festival that essentially defined the term ("Legitimate if you can, coerce if you have to, and accommodate if you must."):

Oligarchy now is audacious. They don't really care if they are legitimate.

"Legitimate if you can, coerce if you have to, and accommodate if you must."

Robert Johnson serves as the Executive Director of the Institute for New Economic Thinking (INET) and a Senior Fellow and Director of the Global Finance Project for the Franklin and Eleanor Roosevelt Institute in New York. Previously, Johnson was a Managing Director at Soros Fund Management where he managed a global currency, bond and equity portfolio specializing in emerging markets. Prior to working at Soros Fund Management, he was a Managing Director of Bankers Trust Company managing a global currency fund.

Johnson served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire (D. Wisconsin) and of Chairman Pete Domenici (R. New Mexico). Johnson received a Ph.D. and M.A. in Economics from Princeton University and a B.S. in both Electrical Engineering and Economics from the Massachusetts Institute of Technology.

As you can see this idea "Legitimate if you can, coerce if you have to, and accommodate if you must." does not differ much with the modus operandi of three-letter agencies, so the terms "audacious oligarchy" and "deep state" are closely related: deep state can be viewed as a social system in this audacious oligarchy rules the population.

We can also think about the term "audacious oligarchy" as the term related to the rise of neo-fascism, (be it neoliberal fascism or Inverted Totalitarism). For some details National Security State / Surveillance State: Review of Literature and a very interesting discussion of Robert Johnson remarks on financial oligarchy at “They’re All Standing on the Deck of the Titanic Looking in Each Other’s Eyes” (naked capitalism, April 21, 2013). That means the key elements of fascist ideology are preserved, with the replacement of Arian Nation for financial oligarchy, but without ruthless physical suppression of opposition which are replaced by financial instruments, blacklisting, economic sanctions and color revolutions in "deviant" countries. Like in Third Reich dominance is supported by relentless propaganda and brainwashing with mechanisms polished since Reagan to perfection. there is now no problem to create an "enemy of the people" when the elite wants and it does not matter which country or individual is selected as an enemy. The essence of elite politics in this area was best formulated by Hermann Goering, President of the Reichstag, Nazi Party, and Luftwaffe Commander in Chief

Naturally the common people don't want war: Neither in Russia, nor in England, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country.

One interesting side effect of the dominance of financial oligarchy is loss of trusts in experts, especially economic expects, professors who now are nothing more then a prostitutes at the service of financial capital Ian Klaus in "Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance gives the following definition:

Trust, to be simple with our definition, is an expectation of behavior built upon norms and cultural habits. It is often dependent upon a shared set of ethics or values. It is also a process orchestrated through communities and institutions. In this sense, it is a cultural event and thus a historical phenomenon.

As Robert Johnson noted:

"People don't trust experts. If you saw 'Inside Job', you know why. People do not trust the private markets, and they don't trust government."

See also Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy.

In the case of neoliberal transformation of the USA the state to a large extent seized to defend the population. Instead the state became a predictor, defender of international corporations, as hostile to the US people as Bolshevik rule was to Russians and other nationalities of the USSR. In other word the USA population became hostages of the system much like population of the USSR was. In a way nothing is new in human history.

The most important side effect of neoliberal transformation of the US society is the destruction (or more correctly emasculation) of legal system, which effectively lead to the situation when like in monarchy, some people are above the law. And we can suspect, judging from recent the USSR nomenklatura experience that such a caste might quickly degrades. As Long Aston said "Power corrupts and absolute power corrupts absolutely". If you willfully and recklessly tear down the laws in the name of some misbegotten ideology the benefit to "chosen" few, blowback might come sooner or later. even if you successfully hide this in a smokescreen of sophisticated scam ideology (neoliberalism in case of current crony or casino capitalism, which replaced the New Deal "live and giver other chance to live" motto) the blowback eventually might knock the particular country down. In such system nobody trust anybody and the whole society gradually disintegrates becoming just extended version of a mafia clan. With typical for such clans deadly internal fights for power. Mexican drug cartels saying - plomo y plobo ('silver or lead'): either you accept our bribes or accept our bullets is perfectly applicable in this situation. And that's how "audacious oligarchy really operates at least of international scène. But the law of the jungle has one important difference with the regular law system: any more powerful group of states can became both a judge and executioner for less powerful, or competing group of states.

When you take some self-serving fairy tale and take it an extreme by sticking an 'ism' on the end of it, like is the case with neoliberalism, at the beginning everything is fine and population is carries by this lie with ease. But as soon as people discover this despite all the power of propaganda their standard of living is going down, some trouble appear on the horizon and there is no other way then to concert the state into national security state, as proponent of communism have found in the USSR. And under neoliberalism, the essence of which is redistribution of wealth in favor of the top 0.01% of the world population, this disillusionment in inevitable, unless we experience a new technological revolution, similar to computer revolution. it can't be hidden with fairly tales about "undemocratic nature" of poor state or corruption. People can only be suppressed by brute force. and the lead to overextension of the neoliberal empire.

When the financial oligarchy is completely exempt from the law and in this particular area regulation is burned to the ground to serve the interests of financial oligarchy, strange things start to happen. The first glimpse on which we already saw in 2008. There was a demonstration of an immanent feature of neoliberal regimes which might be called financial sector induced systemic instability of economy. The latter which lead to periodic booms and busts with unpredictable timing, severity and consequences for the society at large, but so far all of those crisis work also as mechanism of redistribution of the society wealth toward the top . this time the US oligarchy managed to swipe the dirt under the rug.

This instability happens automatically and does not depend on the presence of "bad apples" in the system, because the financial sector under neoliberalism functions not as the nerve system of the economy of the particular country, but more like an autoimmune disease. In other words financial sector destabilizes the "immune system" of the country by introducing positive feedback look into economic (and not only economic, look at the USA foreign policy since 1991) activities.

What exactly is neoliberal oligarchy ?

When we say audacious oligarchy we essentially mean neoliberal oligarchy, and first of all financial oligarchy. Oligarchy is a form of power structure in which power effectively rests with an elite class distinguished by wealth, family ties, commercial, government and/or military positions. The actual literal translation from the Greek is the "rule of the few". The word oligarchy is derived from the Greek words "ὀλίγος" (olígos), "a few"[2] and the verb "ἄρχω" (archo), "to rule, to govern, to command".

Throughout history, most oligarchies have been tyrannical, relying on public servitude to exist, although some have been relatively benign. Plato pioneered the use of the term in Chapter Four, Book Eight of "The Republic" as a society in which wealth is the criterion of merit and the wealthy are in control.

However oligarchy is not always a rule according to the size of the wealth, as oligarchs can simply be a privileged group, and do not have to be distinguished from plebs by iether personal wealth or bloodlines as in a monarchy. Although often those two types of distinction are present too. For example, in the USSR the oligarchy was represented by special class of government and party servants (nomenklatura). The same is by-and-large true for Communist China. Those types of oligarchy has a lot of features in common with neoliberal oligarchy, although they are national in character. First of all in both system oligarchs are "working oligarchs". They actively participate in the their business or government activities. The second thing is that neoliberal oligarchy has very interesting connection with the idea of Communist International, and can be viewed as an interesting perversion of this concept ("Capitalism International") with some flavor of Trotskyism -- as it strives for and adopts Trotskyism central idea of permanent revolution as the method of reaching of the world dominance (see, neocons and color revolutions)

At the same time starting from 80th in the USA oligarchy by-and-large started to correspond to European aristocracy as vertical mobility became very limited and suppressed in the USA (actually more then in European countries, despite all the hype about the American dream).

The USA oligarchy by-and-large corresponds to European aristocracy, with substantial number of its members being children of oligarchic families. Vertical mobility, despite hype, is very limited and suppressed (actually more then in European countries). In no way the USA con be considered "the county of opportunities" anymore.

Russian oligarchy is very atypical in this sense, and is a pretty interesting case of a very high vertical mobility. As a country Russia is unique that in its history it several times wiped out its entrenched oligarchy. Two last "rotations" happened in 1917 then large part of old oligarchy lost their power and after neoliberal revolution of 1991 which brought into power the corrupt government of Boris Yeltsin. The drunkard, who imitated French proclaiming "enrich yourself" and launches (with gentle support from USA in a form of Harvard mafia) the most corrupt privatization of state wealth in human history.

But most members of the new, Post-Soviet Russian oligarchy did demonstrated tremendous level of upward mobility. Since the collapse of the Soviet Union on 31 December 1991, many directors and sometimes middle managers of state owned Russia-based corporations, especially producers of petroleum, natural gas, and metals managed to privatize their holdings and have become oligarchs. Criminal privatization under Yeltsin regime allowed them to amass phenomenal wealth and power almost overnight. In May 2004, the Russian edition of Forbes identified 36 of these oligarchs as being worth at least US$1 billion. And not of all them came from Nomenklatura. Many members of nomenklatura (even on the level of Politburo) did not fit in the new economic system and stopped being oligarchs.

All modern democracies should be viewed as oligarchies

Robert Michels believed that any political system eventually evolves into an oligarchy. He called this the iron law of oligarchy. According to this school of thought, modern democracies should be considered to be oligarchies. this is what his "iron law of oligarchy" is about. In other word when we speak the word democracy about such regimes as current exist in the USA or Western Europe, it is most self-deception.

That gives a pretty sinister meaning to the "promotion of democracy" and "support of democracy" activities, as in reality it is installation of more favorable to the promoter oligarchic group in power, often via coup d'état (with a specific neoliberal variant, which use developed by Gene Sharp political technology, called Color revolution), as recently happened in Libya and Ukraine.

In "modern democracies", the actual differences between viable political rivals are small, the oligarchic elite impose strict limits on what constitutes an acceptable and respectable political position, and politicians' careers depend heavily on unelected economic and media elites. Thus the popular phrase: there is always only one political party, the party of oligarchy.

This is especially true for winner takes all election systems, which create two party environment, with both party being a factions of the same elite. See Two Party System as Polyarchy

Quiet coup

The term "Quiet coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced by Simon H. Johnson (born January 16, 1963). Simon Johnson is a British-American economist, who currently is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. From March 2007 through the end of August 2008, he was Chief Economist of the International Monetary Fund.

The term was introduced in Simon Johnson article in Atlantic magazine, published in May 2009(The Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

The wealth of financial sector gave it unprecedented opportunities of simply buying the political power:

Becoming a Banana Republic

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

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

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

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

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

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

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

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

Financial oligarchy as an key part of modern neoliberal elite

Corporate oligarchy is a form of power, governmental or operational, where such power effectively rests with a small, elite group of inside individuals, sometimes from a small group of educational institutions, or influential economic entities or devices, such as banks, commercial entities that act in complicity with, or at the whim of the oligarchy, often with little or no regard for constitutionally protected prerogative. Monopolies are sometimes granted to state-controlled entities, such as the Royal Charter granted to the East India Company. In this regime people move freely from government posts to private industry and back.

In the USA the most rapidly rising part of national oligarchy is financial oligarchy. As Senator Dick Durbin noted referring to the US Congress Banks Frankly Own The Place. Moreover in many cases it is unclear who owns whom, for example whether Goldman Sachs owns NY FED or NY FED Goldman Sachs ( The Fed Under Goldman's Thumb - Bloomberg )

Senators questioned Dudley, 61, on issues ranging from whether some banks are too big to regulate to the Fed’s role in overseeing their commodities businesses.

Some of the criticism was pointed. Warren, a frequent critic of financial regulators, asked Dudley if he was “holding a mirror to your own behavior.”

Jeff Merkley, an Oregon Democrat, complained that bank employees involved in misdeeds haven’t been prosecuted and are “too big to jail.”

Dudley repeatedly disagreed with assertions that the New York Fed wasn’t doing enough to regulate banks and said lenders have become stronger and safer in the past few years.

... ... ...

Today’s Senate hearing follows reports that Goldman Sachs fired two bankers after one of them allegedly shared confidential documents from the New York Fed within the firm.

A junior banker, who had joined the company in July from the New York Fed, was dismissed a week after the discovery in late September, along with another employee who failed to escalate the issue, according to an internal memo obtained by Bloomberg News. Goldman Sachs confirmed the memo’s contents.

As Adair Turner noted in The Consequences of Money Manager Capitalism

In the wake of World War II, much of the western world, particularly the United States, adopted a new form of capitalism called “managerial welfare-state capitalism.”

The system by design constrained financial institutions with significant social welfare reforms and large oligopolistic corporations that financed investment primarily out of retained earnings. Private sector debt was small, but government debt left over from financing the War was large, providing safe assets for households, firms, and banks. The structure of this system was financially robust and unlikely to generate a deep recession. However, the constraints within the system didn’t hold.

The relative stability of the first few decades after WWII encouraged ever-greater risk-taking, and over time the financial system was transformed into our modern overly financialized economy. Today, the dominant financial players are “managed money” — lightly regulated “shadow banks” like pension funds, hedge funds, sovereign wealth funds, and university endowments—with huge pools of capital in search of the highest returns. In turn, innovations by financial engineers have encouraged the growth of private debt relative to income and the increased reliance on volatile short-term finance and massive uses of leverage.

What are the implications of this financialization on the modern global economy? According to Adair Lord Turner, a Senior Fellow at the Institute for New Economic Thinking and a former head of the United Kingdom’s Financial Services Authority, it means that finance has become central to the daily operations of the economic system. More precisely, the private nonfinancial sectors of the economy have become more dependent on the smooth functioning of the financial sector in order to maintain the liquidity and solvency of their balance sheets and to improve and maintain their economic welfare. For example, households have increased their use of debt to fund education, healthcare, housing, transportation, and leisure. And at the same time, they have become more dependent on interest, dividends, and capital gains as a means to maintain and improve their standard of living.

Another major consequence of financialized economies is that they typically generate repeated financial bubbles and major debt overhangs, the aftermath of which tends to exacerbate inequality and retard economic growth. Booms turn to busts, distressed sellers sell their assets to the beneficiaries of the previous bubble, and income inequality expands.

In the view of Lord Turner, currently there is no countervailing power (in John Kenneth Galbraith terms) able to deal with the consequences of neoliberalism, as he calls it "money manager capitalism.” The net result likely will be years more of economic stagnation and deteriorating living standards for many people around the world.

Finance is a form of modern warfare

As Michael Hudson aptly noted in Replacing Economic Democracy with Financial Oligarchy (2011)

Finance is a form of warfare. Like military conquest, its aim is to gain control of land, public infrastructure, and to impose tribute. This involves dictating laws to its subjects, and concentrating social as well as economic planning in centralized hands. This is what now is being done by financial means, without the cost to the aggressor of fielding an army. But the economies under attacked may be devastated as deeply by financial stringency as by military attack when it comes to demographic shrinkage, shortened life spans, emigration and capital flight.

This attack is being mounted not by nation states as such, but by a cosmopolitan financial class. Finance always has been cosmopolitan more than nationalistic – and always has sought to impose its priorities and lawmaking power over those of parliamentary democracies.

Like any monopoly or vested interest, the financial strategy seeks to block government power to regulate or tax it. From the financial vantage point, the ideal function of government is to enhance and protect finance capital and “the miracle of compound interest” that keeps fortunes multiplying exponentially, faster than the economy can grow, until they eat into the economic substance and do to the economy what predatory creditors and rentiers did to the Roman Empire.

Simon Johnson, former IMF Chief Economist, is coming out in May’s 2009 edition of The Atlantic with a fascinating, highly provocative article, on the collusion between the US’ “financial oligarchy” and the US government and how its persistence will contribute to prolonging the economic crisis. Here is the summary (hat tip to Global Conditions):

One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you (…)

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear.(…)

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis. (…)

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders (…)

Many IMF programs “go off track” (a euphemism) precisely because the government can’t stay tough on erstwhile cronies, and the consequences are massive inflation or other disasters. A program “goes back on track” once the government prevails or powerful oligarchs sort out among themselves who will govern—and thus win or lose—under the IMF-supported plan. (…)

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (…).

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

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

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

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.

(…) the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. (…)

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true (…).

By now, the princes of the financial world have of course been stripped naked as leaders and strategists—at least in the eyes of most Americans. But as the months have rolled by, financial elites have continued to assume that their position as the economy’s favored children is safe, despite the wreckage they have caused (…)

Throughout the crisis, the government has taken extreme care not to upset the interests of the financial institutions, or to question the basic outlines of the system that got us here. In September 2008, Henry Paulson asked Congress for $700 billion to buy toxic assets from banks, with no strings attached and no judicial review of his purchase decisions. Many observers suspected that the purpose was to overpay for those assets and thereby take the problem off the banks’ hands—indeed, that is the only way that buying toxic assets would have helped anything. Perhaps because there was no way to make such a blatant subsidy politically acceptable, that plan was shelved.

Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves. As the crisis has deepened and financial institutions have needed more help, the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand (…)

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary (…)

In some ways, of course, the government has already taken control of the banking system. It has essentially guaranteed the liabilities of the biggest banks, and it is their only plausible source of capital today.

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

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

To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation (…)

Caps on executive compensation, while redolent of populism, might help restore the political balance of power and deter the emergence of a new oligarchy. (…)

(…) Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine”.

The predatory nature of financial oligarchy

The nature of financial oligarchy is such that the government’s capacity to take control of an entire financial system, and to clean, slice it up and re-privatize it impartially is almost non-existent. Instead we have growing, corrupt collusion between financial elites and government officials which is hall mark of corporatism in its most modern form -- neoliberalism.

Second probably is that institutions are more powerful them individuals and replacement or even jailing of corrupt current officials while a quite welcome move, can't by itself lead to drastic changes. You need to reinstall the whole system of government controls dismantled by Clinton-Bush regime. Otherwise one set of players will be simply replaced by the other, no less corrupt, hungry and unprincipled. As Daron Acemoglu pointed out recently, we are in a situation that attempt to fix the financial system will have to involve those same bankers (albeit in lower positions at the time of the crisis) that created the mess in the first place. To push the analogy a bit strongly, even in Germany post 1945 and Iraq post 2003 new governments still needed to work with some civil servants in the judicial and educational system from the previous regime as well as with tainted industrialists.

In theory, the best way to diminish the power of financiers is to limit the size (limiting the damage) and let them fail and crash badly. Also introduction of a tax of transactions (Tobin tax) can help to cool the frenzy of derivative trading. But there is nobody in power who can push those changes. That means the "silent coup" in which financial oligarchy got control of the state is complete.

Loss of trust led to conversion of the country into national security state

Paranoya of financial oligarchy after 2008 when most of the country wished them what was reflected in the slogan of the corner of Wallstreet (see the picture), led to speed up of creation of comprehensive network of spying over the citizens.

According to UN Human Right Council Report (17 April 2013) innovations in technology not only have increased the possibilities for communication and protections of free expression and opinion, enabling anonymity, rapid information-sharing and cross-cultural dialogues. They also simultaneously increased opportunities for State surveillance and interventions into individuals’ private communications facilitating to transformation of the state into National Security State, a form of corporatism characterized by continued and encompassing all forms of electronic communication electronic surveillance of all citizens.

Even if we assume that data collection is passive and never used it is like a ticking bomb or "skeleton in the closet" it is a powerful method of control of population, not the different from what was used by KGB in the USSR or STASI in East Germany.

So it does not really matter much what the data are collected for and what if official justification of such a collection. The mere fact of collection changes the situation to the worse, making opposition to the system practically impossible. The net result is what is matter. And the net result definitely resembles a move in the direction of a tyranny. US Senator Frank Church said in 1975:

"I know the capacity that is there to make tyranny total in America, and we must see to it that this agency [the National Security Agency] and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return.".

Today his words sound even more true then in 1975 when computers were still in their infancy and mainframes dominated the computer landscape. With the proliferation of cheap electronic devices such as PCs and laptops, tablets and cell phones this really became "the abyss from which there is no return".

So the real, the key goal is not what is officially declared. Convenience of access to information has a side effect that it makes collection of information about you trivial and at the same time comprehensive. It is to keep the elite safe from common folks, not all those lies about national security. It is all about the security of the elite.

In other words 1984 dystopia materialized in slightly different, slightly more gentle form. The elite as a whole is not interesting in dismantling the tool that serve its interests so well even if it has some side effects on the elite members themselves. This is another confirmation of The Iron Law of Oligarchy

All-in-all it's a good time to smell the coffee and talk about the rise of a new mutation of totalitarism in the USA. That's exactly what this "Internet-inspired" flavor of total surveillance due to modern technical capabilities means. There is also distinct shadow of Stasi in all those activities. As countries of the USSR camp got into similar trap before, nothing is new under the sun. As Reinhold Niebuhr noted

"Communism is a vivid object lesson in the monstrous consequences of moral complacency about the relation of dubious means to supposedly good ends."

There is actually little difference between total surveillance as practiced by NSA and what was practiced by three letters agencies of Eastern block dictatorships. The key goal in both cases is protection and preservation of power of existing elite against the will of common people. So this is more about oppression of 99.9% from top 0.1% then surveillance per see.

Phone hacking and police corruption represent neoliberalism attempt to cling to life even entering in 2008 a zombie status. And we do not know if the change is possible (The zombie of neoliberalism can be beaten)

Poor growth figures put a "new" financial collapse back on the cards. The response from politicians, bankers and business leaders is more of the same – more of the same neoliberal policies that got us into this situation in the first place.

Neoliberalism no longer "makes sense", but its logic keeps stumbling on, without conscious direction, like a zombie: ugly, persistent and dangerous. Such is the "unlife" of a zombie, a body stripped of its goals, unable to adjust itself to the future, unable to make plans. It can only act habitually as it pursues a monomaniacal hunger. Unless there is a dramatic recomposition of society, we face the prospect of decades of drift as the crises we face – economic, social, environmental – remain unresolved. But where will that recomposition come from when we are living in the world of zombie-liberalism?

... ... ...

Neoliberalism, however, requires more than the internal realignment of a national ruling class. Every semi-stable form of capitalism also needs some sort of settlement with the wider population, or at least a decisive section of it. While the postwar Keynesian settlement contained an explicit deal linking rising real wages to rising productivity, neoliberalism contained an implicit deal based on access to cheap credit. While real wages have stagnated since the late 1970s, the mechanisms of debt have maintained most people's living standards. An additional part of neoliberalism's tacit deal was the abandonment of any pretence to democratic, collective control over the conditions of life: politics has been reduced to technocratic rule. Instead, individuals accepted the promise that, through hard work, shrewd educational and other "life" choices, and a little luck, they – or their children – would reap the benefits of economic growth.

The financial crisis shattered the central component of this deal: access to cheap credit. Living standards can no longer be supported and, for the first time in a century, there is widespread fear that children will lead poorer lives than their parents.

Conclusions

After 2008 the irresponsibility of the financial elites, the power and proliferation of special interest groups that defend interests of oligarchy, the paralysis of Congress and executive power to deal with challenges the financial oligarchy created have created atmosphere of public cynicism.

This correlated with withdrawal from public activity and elections. voter participation in the 1996 Presidential election reached similar to 1924 figure of 49%, less then half of eligible population. And with electronic surveillance reaching it zenith after 9/11/2001, the country quietly slid in the darkness of Inverted Totalitarism

Disillusionment with government and large corporation is a noticeable feature of contemporary America. There is a the widespread sense that big companies and those who run them are immune from prosecution and can't be held accountable by government for their crimes as that they are ... Too Big To Jail. Part of this leniency is connected with corruption of regulators. Which is an immanent part of neoliberal social order. There is also the issue off gaming the system. For very large and profitable multinationals paying some law firm or accounting firm a couple of million dollars to game the tax system in some sleazy way to park most of the income in tax havens represents a small fraction of their tax savings. So the big boys get away with this and middle market firms are the only ones who really pay corporate taxes.

The fact that no one has been imprisoned for the crime committed before 2008 is seen as outrageous by most Americans and large part of Main Street. At the same time, the multibillion-dollar fines and enforcement actions against financial institutions are providing large TBTF firms such as Goldman Sachs with wrong incentives. Paying with shareholders’ money as the price of protecting themselves is a very attractive trade-off. Punishment of individual executives who committed crimes or who failed in their managerial duty to monitor the behavior of their subordinates is short-changed because the principle that leaders should take responsibility for failure and resign contradicts neoliberal worldview.


Top updates

Softpanorama Switchboard
Softpanorama Search


NEWS CONTENTS

Old News ;-)

Neoliberalism Bulletin, 2014 Neoliberalism Bulletin, 2013 Casino Capitalism Bulletin, 2012 Neoliberalism Bulletin, 2011 Casino Capitalism Bulletin, 2010 Neoliberalism Bulletin 2009 Neoliberalism Bulletin 2008

[Apr 17, 2017] If you put the two trends together-increased individual income inequality and increased corporate savings-what were witnessing then is increasing private control over the social surplus

Notable quotes:
"... Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares. ..."
"... Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control. ..."
Apr 17, 2017 | economistsview.typepad.com
RGC , April 16, 2017 at 07:23 AM
Why is it anyone would want to save such an economic system?

April 11, 2017

from David Ruccio

"If you put the two trends together-increased individual income inequality and increased corporate savings -- what we're witnessing then is increasing private control over the social surplus.

Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

Why is it anyone would want to save such an economic system?"

https://rwer.wordpress.com/2017/04/11/why-is-it-anyone-would-want-to-save-such-an-economic-system/#more-28993

[ Tie that to the private banking system ]

anne -> RGC... , April 16, 2017 at 07:40 AM
Possibly I do not understand the matter, but I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse.
RGC -> anne... , April 16, 2017 at 07:50 AM
http://voxeu.org/article/global-corporate-saving-glut
anne -> RGC... , April 16, 2017 at 08:00 AM
https://fred.stlouisfed.org/graph/?g=dnZ6

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1948-2016

* Undistributed profits

https://fred.stlouisfed.org/graph/?g=dnYR

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1980-2016

* Undistributed profits

anne -> anne... , April 16, 2017 at 06:12 PM
Again, I was and am right.

I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse:

https://fred.stlouisfed.org/graph/?g=dnZ6

anne -> RGC... , April 16, 2017 at 08:03 AM
http://voxeu.org/article/global-corporate-saving-glut

April 5, 2017

The global corporate saving glut: Long-term evidence

By Peter Chen, Loukas Karabarbounis, and Brent Neiman

Corporate saving has increased relative to GDP and corporate investment across the world over the past three decades, reflecting how the global decline in the labour has led to increased corporate profits. This column characterises these trends using national income accounts and firm-level data, and relates them to firm characteristics and the accumulation of financial assets. In response to declines in the components of the cost of capital, a model with capital market imperfections generates an increase in corporate saving similar to that found in the data.

[ I am grateful for the reference, but I had already read the paper carefully and found no reason to agree with the assertion that there is long term evidence of a corporate saving glut. ]

RGC -> anne... , April 16, 2017 at 02:55 PM

2.2 National Accounts Structure and Identities

National accounts data include sector accounts that divide the economy into the corporate sector, the government sector, and the household and non-profit sector.

For most economies, the corporate sector can be further disaggregated into financial and non-financial corporations and the household sector can be distinguished from the non-profit sector.

National accounts data also include industry accounts that divide activity according to the International Standard Industrial
Classification, Rev. 4 (SIC).

A set of accounting identities that hold in the aggregate as well as at the sector or industry
level serve as the backbone for the national accounts.

In these accounts, the value of final
production (i.e. production net of intermediate goods) is called gross value added (GVA). When
aggregated to the economy level, GVA equals GDP less net taxes on products. GVA is detailed
in the generation of income account and equals the sum of income paid to capital, labor, and
taxes:


GVA = Gross Operating Surplus (GOS) + Compensation to Labor
+ Net Taxes on Production.


GOS captures the income available to corporations and other producing entities after paying for labor services and after subtracting taxes (and adding subsidies) associated with production.


The distribution of income account splits GOS into gross saving, dividends, and other payments to capital such as taxes on profits, interest payments, reinvested foreign earnings, and other transfers:


GOS = Gross Saving (GS) + Net Dividends | {z } Accounting Profits
+ Taxes on Profits + Interest
− Reinvested Earnings on Foreign Direct Investment + Other Transfers.


Net dividends equal dividends paid less dividends received from subsidiaries or partially-owned entities. Other transfers include social contributions and rental payments on land.

In our analyses, we define (accounting) profits as the sum of gross saving and net dividends.


The capital account connects the flow of saving to the flow of investment as follows:

GS = Net Lending + Gross Fixed Capital Formation + Changes in Inventories + Changes in Other Non-Financial Produced Assets.

The net lending position is defined as the excess of gross saving over investment spending.

https://minneapolisfed.org/research/wp/wp736.pdf

RGC -> RGC... , April 16, 2017 at 03:22 PM
GOS = Gross Saving (GS) + Net Dividends + Taxes on Profits + Interest − Reinvested Earnings on Foreign Direct Investment + Other Transfers.
reason -> RGC... , April 16, 2017 at 07:51 AM
"Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares."

Or in the case of say Bill Gates in deciding which causes get assistance and which not rather than people voting on it (not that I think Bill Gates is necessarily doing harm - but why should he get to decide?).

RC AKA Darryl, Ron -> reason... , April 16, 2017 at 09:33 AM
$democracy
RGC -> reason... , April 16, 2017 at 03:25 PM
Right. And private banks get to do it routinely.

[Apr 09, 2017] the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyones gross income and balance that fiscally by levying taxes that increase with income

Apr 09, 2017 | economistsview.typepad.com

Peter K. , April 08, 2017 at 11:14 AM
This might be the way to go:

http://www.demos.org/blog/3/26/15/why-fiscal-progressivity-discussions-are-so-muddled

Why Fiscal Progressivity Discussions Are So Muddled

Posted by Matt Bruenig on March 26, 2015

Yesterday I wrote about the mistaken way that I think some commentators discuss cross-country tax progressivity. Based on OECD tables and the work of Monica Prasad, the conventional wisdom is that low-inequality countries use extremely progressive transfers rather than progressive taxes to get that way. But when you look at transfer levels in these countries broken down by income decile, you often see something like this:

[chart]

That sure doesn't seem like progressive transfer spending, does it? So how can the conventional wisdom be right if the graph looks like that? Why does this graph seem on first glance to so challenge the conventional wisdom? The answer lies deep in the methodological weeds. Explaining it helps to reveal why I find these discussions to be so muddled and why I think the conveying of the conventional wisdom tends to be broadly unhelpful to normal (and often even very sophisticated) audiences.

...

Treatments of this topic that fail to convey this (and I think many of them do, often because even the writer doesn't understand what's going on) darken more than they illuminate. Really, the "progressivity" discussions in general do that, making the topic far more complicated and muddled than it needs to be.

Which is especially sad because the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyone's gross income and balance that fiscally by levying taxes that increase with income.

pgl -> Peter K.... , April 08, 2017 at 12:18 PM
Some of what he writes makes a little sense but this is really dumb:

"The bigger problem with the regressivity objection, in my view, is that dividing taxes paid by income seems to obscure the more important point. What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people."

Not considering the level of income - just how much a person pays in taxes? Heck - that makes the head tax OK. Dumbest metric for the fairness of the tax system ever.

Peter K. -> pgl... , April 08, 2017 at 01:22 PM
Learn how to read...

"Which is especially sad because the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyone's gross income and balance that fiscally by levying taxes that increase with income."

[Apr 04, 2017] Yes progress was made from 1960 to 1975. But what after that? To dismiss the rise in inequality by saying one can reconfigure the CPI index is Heritage level nonsense.

Apr 04, 2017 | economistsview.typepad.com
pgl , April 03, 2017 at 12:21 PM
Mankiw alert. He is hyping this:

http://www.nber.org/papers/w23292

"Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since 1980 and the number of bedrooms per household has grown 10 percent despite decreases in household size. The finding of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator; small biases in any price deflator compound over long periods of time. Using a different deflator such as the Personal Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout the time period. Accounting for the Hamilton (1998) and Costa (2001) estimates of CPI bias yields estimated wage growth of 1 percent per year during 1975-2015. Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor."

Yes progress was made from 1960 to 1975. But what after that? To dismiss the rise in inequality by saying one can reconfigure the CPI index is Heritage level nonsense.

[Mar 28, 2017] Foundation - Fall Of The American Galactic Empire Zero Hedge

Mar 28, 2017 | www.zerohedge.com
Mar 27, 2017 10:40 PM Authored by Jim Quinn via The Burning Platform blog,

"The fall of Empire, gentlemen, is a massive thing, however, and not easily fought. It is dictated by a rising bureaucracy, a receding initiative, a freezing of caste, a damming of curiosity-a hundred other factors. It has been going on, as I have said, for centuries, and it is too majestic and massive a movement to stop." – Isaac Asimov, Foundation

"Any fool can tell a crisis when it arrives. The real service to the state is to detect it in embryo." – Isaac Asimov, Foundation

I read Isaac Asimov's renowned award winning science fiction trilogy four decades ago as a teenager. I read them because I liked science fiction novels, not because I was trying to understand the correlation to the fall of the Roman Empire. The books that came to be called the Foundation Trilogy (Foundation, Foundation and Empire, and Second Foundation) were not written as novels; they're the collected Foundation stories Asimov wrote between 1941 and 1950. He wrote these stories during the final stages of our last Fourth Turning Crisis and the beginning stages of the next High. This was the same time frame in which Tolkien wrote the Lord of the Rings Trilogy and Orwell wrote 1984 . This was not a coincidence.

The tone of foreboding, danger, dread, and impending doom, along with unending warfare, propels all of these novels because they were all written during the bloodiest and most perilous portion of the last Fourth Turning . As the linear thinking establishment continues to be blindsided by the continued deterioration of the economic, political, social, and cultural conditions in the world, we have entered the most treacherous phase of our present Fourth Turning .

That ominous mood engulfing the world is not a new dynamic, but a cyclical event arriving every 80 or so years. Eight decades ago the world was on the verge of a world war which would kill 65 million people. Eight decades prior to 1937 the country was on the verge of a Civil War which would kill almost 5% of the male population. Eight decades prior to 1857 the American Revolution had just begun and would last six more bloody years. None of this is a coincidence. The generational configuration repeats itself every eighty years, driving the mood change which leads to revolutionary change and the destruction of the existing social order.

Isaac Asimov certainly didn't foresee his Foundation stories representing the decline of an American Empire that didn't yet exist. The work that inspired Asimov was Edward Gibbon's multi-volume series, The Decline and Fall of the Roman Empire , published between 1776 and 1789. Gibbon saw Rome's fall not as a consequence of specific, dramatic events, but as the result of the gradual decline of civic virtue, monetary debasement and rise of Christianity, which made the Romans less vested in worldly affairs.

Gibbon's tome reflects the same generational theory espoused by Strauss and Howe in The Fourth Turning . Gibbon's conclusion was human nature never changes, and mankind's penchant for division, amplified by environmental and cultural differences, is what governs the cyclical nature of history. Gibbon constructs a narrative spanning centuries as events unfold and emperors' successes and failures occur within the context of a relentless decline of empire. The specific events and behaviors of individual emperors were inconsequential within the larger framework and pattern of historical decline. History plods relentlessly onward, driven by the law of large numbers.

Asimov described his inspiration for the novels:

"I wanted to consider essentially the science of psychohistory, something I made up myself. It was, in a sense, the struggle between free will and determinism. On the other hand, I wanted to do a story on the analogy of The Decline and Fall of the Roman Empire, but on the much larger scale of the galaxy. To do that, I took over the aura of the Roman Empire and wrote it very large. The social system, then, is very much like the Roman imperial system, but that was just my skeleton.

It seemed to me that if we did have a galactic empire, there would be so many human beings-quintillions of them-that perhaps you might be able to predict very accurately how societies would behave, even though you couldn't predict how individuals composing those societies would behave. So, against the background of the Roman Empire written large, I invented the science of psychohistory. Throughout the entire trilogy, then, there are the opposing forces of individual desire and that dead hand of social inevitability."

Is History Pre-Determined?

"Don't you see? It's Galaxy-wide. It's a worship of the past. It's a deterioration – a stagnation!" – Isaac Asimov, Foundation

"It has been my philosophy of life that difficulties vanish when faced boldly." – Isaac Asimov, Foundation

The Foundation trilogy opens on Trantor, the capital of the 12,000-year-old Galactic Empire. Though the empire appears stable and powerful, it is slowly decaying in ways that parallel the decline of the Western Roman Empire. Hari Seldon, a mathematician and psychologist, has developed psychohistory, a new field of science that equates all possibilities in large societies to mathematics, allowing for the prediction of future events.

Psychohistory is a blend of crowd psychology and high-level math. An able psychohistorian can predict the long-term aggregate behavior of billions of people many years in the future. However, it only works with large groups. Psychohistory is almost useless for predicting the behavior of an individual. Also, it's no good if the group being analyzed is aware it's being analyzed - because if it's aware, the group changes its behavior.

Using psychohistory, Seldon has discovered the declining nature of the Empire, angering the aristocratic rulers of the Empire. The rulers consider Seldon's views and statements treasonous, and he is arrested. Seldon is tried by the state and defends his beliefs, explaining his theory the Empire will collapse in 300 years and enter a 30,000-year dark age.

He informs the rulers an alternative to this future is attainable, and explains to them generating an anthology of all human knowledge, the Encyclopedia Galactica, would not avert the inevitable fall of the Empire but would reduce the Dark Age to "only" 1,000 years.

The fearful state apparatchiks offer him exile to a remote world, Terminus, with other academic intellectuals who could help him create the Encyclopedia. He accepts their offer, and sets in motion his plan to set up two Foundations, one at either end of the galaxy, to preserve the accumulated knowledge of humanity and thereby shorten the Dark Age, once the Empire collapses. Seldon created the Foundation, knowing it would eventually be seen as a threat to rulers of the Empire, provoking an eventual attack. That is why he created a Second Foundation, unknown to the ruling class.

Asimov's psychohistory concept, based on the predictability of human actions in large numbers, has similarities to Strauss & Howe's generational theory. His theory didn't pretend to predict the actions of individuals, but formulated definite laws developed by mathematical analysis to predict the mass action of human groups. His novel explores the centuries old debate of whether human history proceeds in a predictable fashion, with individuals incapable of changing its course, or whether individuals can alter its progression.

The cyclical nature of history, driven by generational cohorts numbering tens of millions, has been documented over centuries by Strauss & Howe in their 1997 opus The Fourth Turning . Human beings in large numbers react in a herd-like predictable manner. I know that is disappointing to all the linear thinking individualists who erroneously believe one person can change the world and course of history.

The cyclical crisis's that occur every eighty years matches up with how every Foundation story centers on what is called a Seldon crisis, the conjunction of seemingly insoluble external and internal difficulties. The crises were all predicted by Seldon, who appears near the end of each story as a hologram to confirm the Foundation has traversed the latest one correctly.

The "Seldon Crises" take on two forms. Either events unfold in such a way there is only one clear path to take, or the forces of history conspire to determine the outcome. But, the common feature is free will doesn't matter. The heroes and adversaries believe their choices will make a difference when, in fact, the future is already written. This is a controversial viewpoint which angers many people because they feel it robs them of their individuality.

Most people don't want to be lumped together in an amalgamation of other humans because they believe admitting so would strip them of their sense of free will. Their delicate sensibilities are bruised by the unequivocal fact their individual actions are virtually meaningless to the direction of history. But, the madness of crowds can dramatically impact antiquity.

"In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first." – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

Many people argue the dynamic advancements in technology and science have changed the world in such a way to alter human nature in a positive way, thereby resulting in humans acting in a more rational manner. This alteration would result in a level of human progress not experienced previously. The falsity of this technological theory is borne out by the continuation of war, government corruption, greed, belief in economic fallacies, civic decay, cultural degradation, and global disorder sweeping across the world. Humanity is incapable of change. The same weaknesses and self- destructive traits which have plagued them throughout history are as prevalent today as they ever were.

Asimov's solution to the failure of humanity to change was to create an academic oriented benevolent ruling class who could save the human race from destroying itself. He seems to have been well before his time with regards to creating Shadow Governments and Deep State functionaries. It appears he agreed with his contemporary Edward Bernays. The masses could not be trusted to make good decisions, so they needed more intellectually advanced men to guide their actions.

"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized.

Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind." – Edward Bernays – Propaganda

In Part Two of this article I will compare and contrast Donald Trump's rise to power to the rise of The Mule in Asimov's masterpiece. Unusually gifted individuals come along once in a lifetime to disrupt the plans of the existing social order.

Beam Me Up Scotty -> BaBaBouy , Mar 27, 2017 10:56 PM

" He seems to have been well before his time with regards to creating Shadow Governments and Deep State functionaries. It appears he agreed with his contemporary Edward Bernays. The masses could not be trusted to make good decisions, so they needed more intellectually advanced men to guide their actions."

The masses aren't the ones begging to start all of these wars. They are the ones TRYING to make a few good decisions. The Shadow Government and Deep State however, are hell bent on getting us all killed. Who exactly is the problem here??

LetThemEatRand , Mar 27, 2017 10:50 PM

Asimov was a good writer and created some great fiction. That's as far as it goes.

Huxle LetThemEatRand •Mar 27, 2017 10:50 PM y is the one who predicted the current state of affairs. Orwell gets honorable mention. You could also throw in some biblical passages for the mark of the beast, though the best part was clearly written about Nero.

biker Mar 27, 2017 11:06 PM
Of course its better to watch them eat themselves
https://www.theatlantic.com/politics/archive/2017/03/rewriting-the-rules...

[Mar 25, 2017] Its Not Just Unfair: Inequality Is a Threat to Our Governance

Notable quotes:
"... As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic." ..."
"... Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West. ..."
"... Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. ..."
"... Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society. ..."
"... In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone. ..."
"... It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements. ..."
Mar 25, 2017 | economistsview.typepad.com
anne : March 25, 2017 at 11:26 AM
https://www.nytimes.com/2017/03/20/books/review/crisis-of-the-middle-class-constitution-ganesh-sitaraman-.html

March 20, 2017

It's Not Just Unfair: Inequality Is a Threat to Our Governance
By ANGUS DEATON

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION
Why Economic Inequality Threatens Our Republic
By Ganesh Sitaraman

President Obama labeled income inequality "the defining challenge of our time." But why exactly? And why "our time" especially? In part because we now know just how much goes to the very top of the income distribution, and beyond that, we know that recent economic growth, which has been anemic in any case, has accrued mostly to those who were already well-heeled, leaving stagnation or worse for many Americans. But why is this a problem?

Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich - hard work and innovation are O.K., but theft, legal or otherwise, is not. Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic."

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

The founders worried a good deal about people getting too rich. Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. (Contrast this with those today who simultaneously advocate both equality of opportunity and the abolition of estate taxes.) Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society.

Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? ...

Angus Deaton, a professor emeritus at Princeton, was awarded the Nobel in economic science in 2015.

anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] Its interesting that the language of inequality is the language of technocrats, however worthy. Its a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements

Mar 25, 2017 | economistsview.typepad.com
anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] Angry Bear " U.S. Has Worst Wealth Inequality of Any Rich Nation, and It's Not Even Close

Mar 25, 2017 | angrybearblog.com
U.S. Has Worst Wealth Inequality of Any Rich Nation, and It's Not Even Close

Kenneth Thomas | March 19, 2017 6:07 am

Hot Topics I've discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition , from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world's wealth (Report, p. 18).

One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.

The tables below illustrate this. First, I will present the 29 countries with median wealth per adult over $40,000 per year, from largest to smallest. The second table also includes mean wealth per adult and the mean/median ratio, sorted by the inequality ratio.

1. Switzerland $244,002
2. Iceland $188,088
3. Australia $162,815
4. Belgium $154,815
5. New Zealand $135,755
6. Norway $135,012
7. Luxembourg $125,452
8. Japan $120,493
9. United Kingdom $107,865
10. Italy $104,105
11. Singapore $101,386
12. France $ 99,923
13. Canada $ 96,664
14. Netherlands $ 81,118
15. Ireland $ 80,668
16. Qatar $ 74,820
17. Korea $ 64,686
18. Taiwan $ 63,134
19. United Arab Emirates $ 62,332
20. Spain $ 56,500
21. Malta $ 54,562
22. Israel $ 54,384
23. Greece $ 53,266
24. Austria $ 52,519
25. Finland $ 52,427
26. Denmark $ 52,279
27. United States $ 44,977
28. Germany $ 42,833
29. Kuwait $ 40,803

Source: Credit Suisse Global Wealth Databook 2016, Table 3-1

Now that I've got your attention, let me remind you why this low level of median wealth is a BIG PROBLEM. Quite simply, we are careening towards a retirement crisis as Baby Boomers like myself find their income drop off a cliff in retirement. As I reported in 2013 , 49% (!) of all private sector workers have no retirement plan at all, not even a crappy 401(k). 31% have only a 401(k), which shifts all the investment risk on to the individual, rather than pooling that risk as Social Security does. And many people had to borrow against their 401(k) during the Great Recession, including 1/3 of people in their forties . The overall savings shortfall is $6.6 trillion! If Republican leaders finally get their wish to gut Social Security, prepare to see levels of elder poverty unlike anything in generations. It will not be pretty.

Let's move now to the inequality data, where I'll present median wealth per adult, mean wealth per adult, and the mean-to-median ratio, a significant indicator of inequality. These data will be sorted by that ratio.

1. United States $ 44,977 $344,692 7.66
2. Denmark $ 52,279 $259,816 4.97
3. Germany $ 42,833 $185,175 4.32
4. Austria $ 52,519 $206,002 3.92
5. Israel $ 54,384 $176,263 3.24
6. Kuwait $ 40,803 $119,038 2.92
7. Finland $ 52,427 $146,733 2.80
8. Canada $ 96,664 $270,179 2.80
9. Taiwan $ 63,134 $172,847 2.74
10. Singapore $101,386 $276,885 2.73
11. United Kingdom $107,865 $288,808 2.68
12. Ireland $ 80,668 $214,589 2.66
13. Luxembourg $125,452 $316,466 2.52
14. Korea $ 64,686 $159,914 2.47
15. France $ 99,923 $244,365 2.45
16. United Arab Emirates $ 62,332 $151,098 2.42
17. Norway $135,012 $312,339 2.31
18. Australia $162,815 $375,573 2.31
19. Switzerland $244,002 $561,854 2.30
20. Netherlands $ 81,118 $184,378 2.27
21. New Zealand $135,755 $298,930 2.20
22. Iceland $188,088 $408,595 2.17
23. Qatar $ 74,820 $161,666 2.16
24. Malta $ 54,562 $116,185 2.13
25. Spain $ 56,500 $116,320 2.06
26. Greece $ 53,266 $103,569 1.94
27. Italy $104,105 $202,288 1.94
28. Japan $120,493 $230,946 1.92
29. Belgium $154,815 $270,613 1.75

Source: Author's calculations from Credit Suisse Global Wealth Databook 2016, Table 3-1

As you can see, the U.S. inequality ratio is more than 50% higher than #2 Denmark and fully three times as high as the median country on the list, France. As the title says, this is not even close.

The message couldn't be clearer: Get down to your town halls and let your Senators and Representatives know that it's time to raise Social Security benefits and forget the nonsense of cutting them.

Cross-posted from Middle Class Political Economist .

[Mar 25, 2017] Theyre Like The Praetorian Guard - Whistleblower Confirms NSA Targeted Congress, The Supreme Court, Trump Zero Hedge

Notable quotes:
"... "They're taking in fundamentally the entire fiber network inside the United States and collecting all that data and storing it, in a program they call Stellar Wind," Binney said. ..."
"... "That's the domestic collection of data on US citizens, US citizens to other US citizens," he said. "Everything we're doing, phone calls, emails and then financial transactions, credit cards, things like that, all of it." ..."
"... "I mean, that's just East German," Tucker responded. ..."
"... Rather than help prevent terrorist attacks, Binney said collecting so much information actually makes stopping attacks more difficult. ..."
"... "This bulk acquisition is inhibiting their ability to detect terrorist threats in advance so they can't stop them so people get killed as a result," he said. ..."
"... "Which means, you know, they pick up the pieces and blood after the attack. That's what's been going on. I mean they've consistently failed. When Alexander said they'd stop 54 attacks and he was challenged to produce the evidence to prove that he failed on every count." ..."
"... Binney concludes ominously indicating the origin of the deep state... "They are like the praetorian guard, they determine what the emperor does and who the emperor is..." ..."
Mar 25, 2017 | www.zerohedge.com
Authored by Chris Menahan via InformationLiberation.com,

NSA whistleblower William Binney told Tucker Carlson on Friday that the NSA is spying on "all the members of the Supreme Court, the Joint Chiefs of Staff, Congress, both House and Senate, as well as the White House."

Binney, who served the NSA for 30 years before blowing the whistle on domestic spying in 2001, told Tucker he firmly believes that Trump was spied on.

"They're taking in fundamentally the entire fiber network inside the United States and collecting all that data and storing it, in a program they call Stellar Wind," Binney said.

"That's the domestic collection of data on US citizens, US citizens to other US citizens," he said. "Everything we're doing, phone calls, emails and then financial transactions, credit cards, things like that, all of it."

https://www.youtube.com/embed/lkChOSdOgcc

"Inside NSA there are a set of people who are -- and we got this from another NSA whistleblower who witnessed some of this -- they're inside there, they are targeting and looking at all the members of the Supreme Court, the Joint Chiefs of Staff, Congress, both House and Senate, as well as the White House," Binney said.

"And all this data is inside the NSA in a small group where they're looking at it. The idea is to see what people in power over you are going to -- what they think, what they think you should be doing or planning to do to you, your budget, or whatever so you can try to counteract before it actually happens," he said.

"I mean, that's just East German," Tucker responded.

Rather than help prevent terrorist attacks, Binney said collecting so much information actually makes stopping attacks more difficult.

"This bulk acquisition is inhibiting their ability to detect terrorist threats in advance so they can't stop them so people get killed as a result," he said.

"Which means, you know, they pick up the pieces and blood after the attack. That's what's been going on. I mean they've consistently failed. When Alexander said they'd stop 54 attacks and he was challenged to produce the evidence to prove that he failed on every count."

Binney concludes ominously indicating the origin of the deep state... "They are like the praetorian guard, they determine what the emperor does and who the emperor is..."

Who's going to stop them?

toady -> Bank_sters Mar 25, 2017 9:22 PM
I'm continually amazed that anyone thinks they are not being "wiretapped".

One more time;

Everyone, from the queen to the homeless guy on the corner, is being tracked, recorded, and data mined to the hilt.

I hope people start to REALLY understand this....

NAV GUS100CORRINA Mar 25, 2017 7:19 PM

Bringing history more up to date, this is Stalinism, i.e., fascism. As John T. Flynn states, "Fascism is Fabian socialism plus the inevitable dictator." Neo-fascism of course is Stalinism-blame Hitler.

So, is it fascism?

Yes, says Major Todd Pierce (retired) in an interview with Philip Weiss of Mondoweiss - who says NSA whistle blower Bill Binney has "got to be one of the smartest people in the world, I don't think that's an exaggeration. He was one of the smartest people at the NSA.

Says Weiss: "And he agrees with me fully. Because he's seen the NSA. We're a more sophisticated form of what I think has to be called fascism. The term fascism was applied to the way the communists and Stalin got on as well. You bring the term fascist to what it really means, and that ultimately is, ultramilitarism and authoritarianism combined with an expansionist foreign policy. And that's us-what you can see us becoming."

http://mondoweiss.net/2016/09/innocence-worldview-retired/#sthash.XjFDU6km.dpuf

Rubicon727 -> GUS100CORRINA •Mar 25, 2017 7:38 PM

The Roman Empire's death was far more complicated than "moral rot" and its "currency devaluation." Read some history books.

Chris Hedges makes the observation that ALL empires that are scourges of the earth, eventually turn inwards. As the empire begins its fatal decline, the terror they inflicted on outsiders, is then turned against its own citizens.

We now see that happening in America. Banks, corporations, intel/military, etc. are turning inward: destroying meaningful employment, humane health care, and pilfering billions of $s reserved for the 1%.

Just Another Vi... -> FriendlyAquaponics •Mar 25, 2017 8:05 PM

A video worth revisiting......

Reuters ..........

... Obama criticizes Donald Trump endlessly....over Trumps assertions that the election is rigged..,

telling the candidate to "stop whining and go try to make his case to get votes."

http://www.reuters.com/article/us-usa-election-idUSKCN12I27L

HRClinton -> JLee2027 •Mar 25, 2017 8:15 PM

Who does the NSA work for on the Org Chart?

That's right, the DOD. They can't go completely rogue, without the explicit or implicit approval of the Secretary of Defense and his Deputies.

It is rather phoney and hypocritical of any POTUS - including Pres. Thump - to moan about the NSA, without loping off heads at the DOD and NSA. By that, I include all the Deputies, who do the real work and know the real secrets.

It's time that Thump had a "Come to Jesus" meeting with all these guys. Else he's part of the problem, and no amount of sugar coating can stop a turd being a turd.

TheReplacement -> HRClinton •Mar 25, 2017 9:42 PM

In an honest world, sure.

In reality, no. Like Binney said, they don't have to do anything they don't like because NOBODY can prove they haven't complied with orders. There is nobody who can watch the watchers. They can blackmail anyone.

'Gosh, I have no idea how that child porn got on my computer.'

CIA or NSA knows exactly how it got there. They put it there.

[Mar 25, 2017] It's Not Just Unfair: Inequality Is a Threat to Our Governance

Mar 25, 2017 | economistsview.typepad.com
anne : March 25, 2017 at 11:26 AM

, March 25, 2017 at 11:26 AM
https://www.nytimes.com/2017/03/20/books/review/crisis-of-the-middle-class-constitution-ganesh-sitaraman-.html

March 20, 2017

It's Not Just Unfair: Inequality Is a Threat to Our Governance
By ANGUS DEATON

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION
Why Economic Inequality Threatens Our Republic
By Ganesh Sitaraman

President Obama labeled income inequality "the defining challenge of our time." But why exactly? And why "our time" especially? In part because we now know just how much goes to the very top of the income distribution, and beyond that, we know that recent economic growth, which has been anemic in any case, has accrued mostly to those who were already well-heeled, leaving stagnation or worse for many Americans. But why is this a problem?

Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich - hard work and innovation are O.K., but theft, legal or otherwise, is not. Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic."

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

The founders worried a good deal about people getting too rich. Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. (Contrast this with those today who simultaneously advocate both equality of opportunity and the abolition of estate taxes.) Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society.

Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? ...


Angus Deaton, a professor emeritus at Princeton, was awarded the Nobel in economic science in 2015.

anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy.

It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] Hillary and her faction were puppets of deep state. Their liberal interventionist hawk was the same idea as neocons, in many cases it was the same people.

Notable quotes:
"... I suspect that Bill and Hillary Clinton were recruited in the sixties under COINTELPRO (Hillary) and the CIA to do spywork for them. Having been a college student in the late sixties, if you went to a peace rally there was an undercover FBI agent to your left, a CIA asset to your right, a military intelligence officer sitting behind you and a cop from the local red squad in front of you. ..."
"... I understand that Bill's friends in England just presumed he was CIA. ..."
"... Hillary's morphing from Goldwater Girl to neoliberal Democrat occurred while she was hovering around Black Panther legal problems. She observed the Panther trials in New Haven and then spent a summer interning for the law firm in Berkeley that at the time was representing the Black Panthers on the West Coast. The Panthers were the FBI's number one target back then. ..."
"... having "moderate" Dems connected to the Deep State is always helpful. It appears that the role of the Clintons in our unwritten history was to move the Democratic Party to the corporate right. ..."
"... Hillary, when serving on the legal staff for the Democratic Watergate Committee, certainly sat in a place where she could report Democratic progress and how various intelligence leaks were viewed by the other Democrats. ..."
"... The current "Russia hack/Trump traitor" false flag (I describe it more fully below) was originally to give a self-righteous President Clinton the moral high ground to march into Ukraine, the one thing that Trump wouldn't give the Deep State. ..."
Mar 25, 2017 | consortiumnews.com

Mark Thomason , March 23, 2017 at 1:08 pm

This should be no real surprise. Hillary and her faction were neo-Republicans. Their liberal interventionist hawk was the same idea as neocons, in many cases it was the same people.

They kept control of the party. It is not Democratic in the sense of opposing war or McCarthyism or corporate abuses or Wall Street or trade agreements. It is bought and paid for by the people who were the Republicans all along.

This is the end state of triangulating courtesy of Bill Clinton. We have two Republican parties, one even crazier than the other.

Bob In Portland , March 23, 2017 at 4:00 pm

I suspect that Bill and Hillary Clinton were recruited in the sixties under COINTELPRO (Hillary) and the CIA to do spywork for them. Having been a college student in the late sixties, if you went to a peace rally there was an undercover FBI agent to your left, a CIA asset to your right, a military intelligence officer sitting behind you and a cop from the local red squad in front of you.

I understand that Bill's friends in England just presumed he was CIA.

Hillary's morphing from Goldwater Girl to neoliberal Democrat occurred while she was hovering around Black Panther legal problems. She observed the Panther trials in New Haven and then spent a summer interning for the law firm in Berkeley that at the time was representing the Black Panthers on the West Coast. The Panthers were the FBI's number one target back then.

After JFK's removal, the Deep State wanted better control of both parties. Nixon wasn't supposed to be the problem he was for them, so Watergate. But having "moderate" Dems connected to the Deep State is always helpful. It appears that the role of the Clintons in our unwritten history was to move the Democratic Party to the corporate right.

Perhaps Bill earned his bones with Asa Hutchinson in the 80s by ignoring Mena. Hillary, when serving on the legal staff for the Democratic Watergate Committee, certainly sat in a place where she could report Democratic progress and how various intelligence leaks were viewed by the other Democrats.

The current "Russia hack/Trump traitor" false flag (I describe it more fully below) was originally to give a self-righteous President Clinton the moral high ground to march into Ukraine, the one thing that Trump wouldn't give the Deep State.

JWalters , March 23, 2017 at 9:14 pm

Interesting speculations. For new readers just getting acquainted with the Deep State, consider the scholarly work by professor Peter Dale Scott. Here are three interviews about his books.

In the Conversations With History series from UC Berkeley.
https://www.youtube.com/watch?v=CBGgxU27kJA

Deep Politics on the 50th anniversary of JFK's murder.
https://www.youtube.com/watch?v=L0CFpMej3mA

The American Deep State: Wall Street, Big Oil, and the Attack on U.S. Democracy
https://www.youtube.com/watch?v=-QH9yOzhkio

[Mar 24, 2017] Paltering as a new way to not tell the truth

Notable quotes:
"... The palter was to skip the fact that it had broken down twice in the last year, instead saying, "This car drives very smoothly and is very responsive. Just last week it started up with no problems when the temperature was 5 degrees Fahrenheit." The outright lie would have been: "This car has never had problems." Researchers learned that car sellers perceived paltering as more ethical than lying, and thus used it more. ..."
"... Paltering allows people who consider themselves honest to deceive others while getting the same results that lying would. In a third experiment, participants in a pretend real estate negotiation performed just as well when they paltered as they did when they lied. Their successes didn't come without costs, however. When the deception was discovered, negotiation partners deemed palterers as untrustworthy as liars. ..."
"... One occasional advantage of paltering over lying is plausible deniability: You can blame any misunderstanding on the listener. ..."
"... So how can you avoid falling victim? "If you ask a specific question, that specific question should be answered, not a variant of it," Rogers says, even though insistence on clarification "often makes you look like a jerk." ..."
"... Paltering relies on our tendency to trust others and not cause a scene. ..."
Mar 19, 2017 | economistsview.typepad.com
Fred C. Dobbs : March 18, 2017 at 08:39 PM , 2017 at 08:39 PM 'Paltering,' a new way to not tell the truth
http://www.bostonglobe.com/ideas/2017/03/17/paltering-new-way-not-tell-truth/TRB2ap22NK5Ya8KjF4x0GI/story.html?event=event25 via @BostonGlobe
Matthew Hutson - March 17, 2017

... ... ..

Although paltering occurs in all realms of life, researchers at Harvard's Kennedy School of Government focused on its use in negotiation. In one of eight studies to be published in the Journal of Personality and Social Psychology, study participants pretended to sell a used car on eBay. They answered the buyer's question "Has this car ever had problems?" with a response selected from a list supplied by the researchers.

The palter was to skip the fact that it had broken down twice in the last year, instead saying, "This car drives very smoothly and is very responsive. Just last week it started up with no problems when the temperature was 5 degrees Fahrenheit." The outright lie would have been: "This car has never had problems." Researchers learned that car sellers perceived paltering as more ethical than lying, and thus used it more.

In another study, half of surveyed executives said they paltered in more than "a few" of their negotiations, versus a fifth who said they actively lied more than a few times. Consistent with this discrepancy, executives viewed the behavior as more honest than lying.

Paltering allows people who consider themselves honest to deceive others while getting the same results that lying would. In a third experiment, participants in a pretend real estate negotiation performed just as well when they paltered as they did when they lied. Their successes didn't come without costs, however. When the deception was discovered, negotiation partners deemed palterers as untrustworthy as liars.

Another study found that victims saw palterers as less ethical than palterers saw themselves. We have a "broken mental model" of paltering, the researchers have concluded, seeing this behavior as honest when others do not.

One occasional advantage of paltering over lying is plausible deniability: You can blame any misunderstanding on the listener. Without knowing the speaker's intentions, it's difficult to diagnose paltering with certainty says Todd Rogers, a behavioral scientist at the Kennedy School and the paper's lead author. Few examples are as clear as Bill Clinton's response when asked if he'd had a sexual relationship with Monica Lewinsky: "There is not a sexual relationship - that is accurate." (Note the slick use of present tense.)

So how can you avoid falling victim? "If you ask a specific question, that specific question should be answered, not a variant of it," Rogers says, even though insistence on clarification "often makes you look like a jerk."

Paltering relies on our tendency to trust others and not cause a scene. "It's pretty amazing how much you can get away with because of people's truth bias," says David Clementson, a researcher at Ohio State University's School of Communication, who was not involved in the study. "Paltering totally takes advantage of that, diabolically and deceptively."

Artful Paltering: The Risks and Rewards
of Using Truthful Statements to Mislead Others
Rogers, Todd; Zeckhauser, Richard; et al.
Journal of Personality and Social Psychology,
Vol 112(3), Mar 2017,
https://www.apa.org/pubs/journals/releases/psp-pspi0000081.pdf

There's a Word for Using
Truthful Facts to Deceive: Paltering
HBR - Francesca Gino - October 05, 2016
https://hbr.org/2016/10/theres-a-word-for-using-truthful-facts-to-deceive-paltering

[Mar 23, 2017] Inequality is a real threat to any remnants of democracy in the USA

Mar 23, 2017 | economistsview.typepad.com
anne : March 22, 2017 at 10:27 AM , 2017 at 10:27 AM
https://www.nytimes.com/2017/03/20/books/review/crisis-of-the-middle-class-constitution-ganesh-sitaraman-.html

March 20, 2017

It's Not Just Unfair: Inequality Is a Threat to Our Governance
By ANGUS DEATON

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION
Why Economic Inequality Threatens Our Republic
By Ganesh Sitaraman

President Obama labeled income inequality "the defining challenge of our time." But why exactly? And why "our time" especially? In part because we now know just how much goes to the very top of the income distribution, and beyond that, we know that recent economic growth, which has been anemic in any case, has accrued mostly to those who were already well-heeled, leaving stagnation or worse for many Americans. But why is this a problem?

Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich - hard work and innovation are O.K., but theft, legal or otherwise, is not. Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic."

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

The founders worried a good deal about people getting too rich. Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. (Contrast this with those today who simultaneously advocate both equality of opportunity and the abolition of estate taxes.) Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society.

Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? I am not persuaded that we can be saved by the return of a rational and public-spirited middle class, even if I knew exactly how to identify middle-class people, or to measure how well they are doing. Nor is it clear, postelection, whether the threat is an incipient oligarchy or an incipient populist autocracy; our new president tweets from one to the other. And European countries, without America's middle-class Constitution, face some of the same threats, though more from autocracy than from plutocracy, which their constitutions may have helped them resist. Yet it is clear that we in the United States face the looming threat of a takeover of government by those who would use it to enrich themselves together with a continuing disenfranchisement of large segments of the population....


Angus Deaton, a professor emeritus at Princeton, was awarded the Nobel in economic science in 2015.

libezkova -> anne... , March 22, 2017 at 04:58 PM
Thank you Anne.

As for ".. it is clear that we in the United States face the looming threat of a takeover of government by those who would use it to enrich themselves together with a continuing disenfranchisement of large segments of the population...."

that was accomplished in 1980 by Reagan. That's why we now can speak about "a colony nation" within the USA which encompasses the majority of population.

libezkova -> libezkova... , March 22, 2017 at 04:59 PM
Neoliberals vs the rest of population is like slave owners and the plantation workers.

[Mar 23, 2017] Jane Harmon on On Point Radio also denied the existence of an American Deep State. That was especially rich coming from a long time supporter of the Military Industrial Complex

Mar 23, 2017 | www.nakedcapitalism.com
Peter Van Erp , March 22, 2017 at 4:27 pm

"Why Steve Bannon Wants You to Believe in the Deep State" [Politico]. Yesterday, Jane Harmon on On Point Radio also denied the existence of an American Deep State. That was especially rich coming from a long time supporter of the Military Industrial Complex, and current member of the pundit class from her position as the First Woman to Head the Wilson Center.
Let the word go forth from this time and place that the government works in your best interests, despite the apparent fact that it doesn't work for most Americans and keeps delivering more and more benefits to the oligarchy. Any attempt to explain it as deliberate policy is a fantasy, a fever dream of rabid leftists right wing nuts.

Paid Minion , March 22, 2017 at 4:47 pm

Funny how some are getting their undies in a twist over "foreign interference" in our elections.

Globalists push global markets, global labor pools, global "race to the bottom" rules for white collar crime. Yet are surprised/offended by "global elections". Especially when the US government interferes (directly or indirectly) with every country on the face of the earth.

Maybe we should be happy that our government is for sale to the highest bidder, worldwide. After all, global competition has done so much for US business and labor.

So we have Global Kleptocrats. In charge of the Global Banana Republic.

MyLessThanPrimeBeef , March 22, 2017 at 5:37 pm

"Domestic interference' is not OK.

But I think we should ignore it for now, per the Propaganda Ministry.

Lambert Strether Post author , March 23, 2017 at 3:51 am

Putin forced the Democrats to lose all those ballots in Brooklyn. It's incredible.

Lambert Strether Post author , March 23, 2017 at 3:58 am

> the deep state

Watch that definite article. (What that Politico article shows is how easy it is to write sloppy articles about the "deep state." That's because the deep state is such a sloppy, amorphous concept. It's very sloppiness is what makes it simultaneously (a) useful to our scribes in the political class, who can (b) bang out stories with click-baity headlines easily, while (c) disempowering to the rest of us (since to have power over your enemies, you have to understand them).

[Mar 22, 2017] The Men Who Stole the World

Notable quotes:
"... History will look back at us with the same wonder that we look back on the mad excesses of certain nations founded in devotion to extreme, almost other-worldly, ideologies of the last century. ..."
"... Apparently the slashing of health benefits for the unfortunate is not severe enough in the proposed Trump/Ryan plan. Our GOP house neo-liberals are enthusiastic to unleash the wonders of the cure-all deregulated market on the American public, again. Like a dog returns to its vomit. ..."
Mar 22, 2017 | jessescrossroadscafe.blogspot.com
"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."

Dean Baker

"When the modern corporation acquires power over markets, power in the community, power over the state and power over belief, it is a political instrument, different in degree but not in kind from the state itself. To hold otherwise - to deny the political character of the modern corporation - is not merely to avoid the reality.

It is to disguise the reality. The victims of that disguise are those we instruct in error."

John Kenneth Galbraith

And unfortunately the working class victims of that disguise are going to be receiving the consequences of their folly, and then some.

Secure in their monopolies and key positions with regard to reform and the law, the corporations are further acquiring access to the protections of the rights of individuals as well, it appears, at least according to Citizens United .

Maybe our leaders and their self-proclaimed technocrats will finally do the right thing. I personally doubt it, except that if they do it will probably be by accident.

More likely, the right thing will eventually come about the old-fashioned way- under the duress of a crisis, and the growing protests of the much neglected and long suffering.

History will look back at us with the same wonder that we look back on the mad excesses of certain nations founded in devotion to extreme, almost other-worldly, ideologies of the last century.

... ... ...

Apparently the slashing of health benefits for the unfortunate is not severe enough in the proposed Trump/Ryan plan. Our GOP house neo-liberals are enthusiastic to unleash the wonders of the cure-all deregulated market on the American public, again. Like a dog returns to its vomit.

Better if they start breaking up corporate health monopolies and embrace real reform at the sources of the soaring costs. The US pays far, far too much for drugs and healthcare, and deregulating the markets is not the solution. We do have the example of the rest of the developed world for what to do about this. It is called 'single payer.'

But players keep on playing. And politicians and their enablers in the professions will not see what their big money donors do not wish them to see. And that is one of their few bipartisan efforts.

Might one suggest that our political animals stop trying to do all the reforming and cost controls bottom up, while applying the stimulus top down? That approach they have been flogging to no avail for about thirty years is a recipe for a dying middle class.

Here is a short video from the Bernie Sanders WV town hall that shows The Face of American Desperation. By the way, the governor of West Virginia is a Democrat. He wasn't there.

...

[Mar 21, 2017] Robots and Inequality: A Skeptics Take

Notable quotes:
"... And all costs are labor costs. It it isn't labor cost, it's rents and economic profit which mean economic inefficiency. An inefficient economy is unstable. Likely to crash or drive revolution. ..."
"... Free lunch economics seeks to make labor unnecessary or irrelevant. Labor cost is pure liability. ..."
"... Yet all the cash for consumption is labor cost, so if labor cost is a liability, then demand is a liability. ..."
"... Replace workers with robots, then robots must become consumers. ..."
"... "Replace workers with robots, then robots must become consumers." Well no - the OWNERS of robots must become consumers. ..."
"... I am old enough to remember the days of good public libraries, free university education, free bus passes for seniors and low land prices. Is the income side of the equation all that counts? ..."
Mar 21, 2017 | economistsview.typepad.com
Douglas Campbell:
Robots and Inequality: A Skeptic's Take : Paul Krugman presents " Robot Geometry " based on Ryan Avent 's "Productivity Paradox". It's more-or-less the skill-biased technological change hypothesis, repackaged. Technology makes workers more productive, which reduces demand for workers, as their effective supply increases. Workers still need to work, with a bad safety net, so they end up moving to low-productivity sectors with lower wages. Meanwhile, the low wages in these sectors makes it inefficient to invest in new technology.
My question: Are Reagan-Thatcher countries the only ones with robots? My image, perhaps it is wrong, is that plenty of robots operate in Japan and Germany too, and both countries are roughly just as technologically advanced as the US. But Japan and Germany haven't seen the same increase in inequality as the US and other Anglo countries after 1980 (graphs below). What can explain the dramatic differences in inequality across countries? Fairly blunt changes in labor market institutions, that's what. This goes back to Peter Temin's " Treaty of Detroit " paper and the oddly ignored series of papers by Piketty, Saez and coauthors which argues that changes in top marginal tax rates can largely explain the evolution of the Top 1% share of income across countries. (Actually, it goes back further -- people who work in Public Economics had "always" known that pre-tax income is sensitive to tax rates...) They also show that the story of inequality is really a story of incomes at the very top -- changes in other parts of the income distribution are far less dramatic. This evidence also is not suggestive of a story in which inequality is about the returns to skills, or computer usage, or the rise of trade with China. ...

mulp : , March 21, 2017 at 01:54 AM

Yet another economist bamboozled by free lunch economics.

In free lunch economics, you never consider demand impacted by labor cost changed.

TANSTAAFL so, cut labor costs and consumption must be cut.

Funny things can be done if money is printed and helicopter dropped unequally.

Printed money can accumulate in the hands of the rentier cutting labor costs and pocketing the savings without cutting prices.

Free lunch economics invented the idea price equals cost, but that is grossly distorting.

And all costs are labor costs. It it isn't labor cost, it's rents and economic profit which mean economic inefficiency. An inefficient economy is unstable. Likely to crash or drive revolution.

Free lunch economics seeks to make labor unnecessary or irrelevant. Labor cost is pure liability.

Yet all the cash for consumption is labor cost, so if labor cost is a liability, then demand is a liability.

Replace workers with robots, then robots must become consumers.

reason -> mulp... , March 21, 2017 at 03:47 AM
"Replace workers with robots, then robots must become consumers." Well no - the OWNERS of robots must become consumers.
reason : , March 21, 2017 at 03:35 AM
I am old enough to remember the days of good public libraries, free university education, free bus passes for seniors and low land prices. Is the income side of the equation all that counts?
anne : , March 21, 2017 at 06:37 AM
https://medium.com/@ryanavent_93844/the-productivity-paradox-aaf05e5e4aad#.brb0426mt

March 16, 2017

The productivity paradox
By Ryan Avent

People are worried about robots taking jobs. Driverless cars are around the corner. Restaurants and shops increasingly carry the option to order by touchscreen. Google's clever algorithms provide instant translations that are remarkably good.

But the economy does not feel like one undergoing a technology-driven productivity boom. In the late 1990s, tech optimism was everywhere. At the same time, wages and productivity were rocketing upward. The situation now is completely different. The most recent jobs reports in America and Britain tell the tale. Employment is growing, month after month after month. But wage growth is abysmal. So is productivity growth: not surprising in economies where there are lots of people on the job working for low pay.

The obvious conclusion, the one lots of people are drawing, is that the robot threat is totally overblown: the fantasy, perhaps, of a bubble-mad Silicon Valley - or an effort to distract from workers' real problems, trade and excessive corporate power. Generally speaking, the problem is not that we've got too much amazing new technology but too little.

This is not a strawman of my own invention. Robert Gordon makes this case. You can see Matt Yglesias make it here. * Duncan Weldon, for his part, writes: **

"We are debating a problem we don't have, rather than facing a real crisis that is the polar opposite. Productivity growth has slowed to a crawl over the last 15 or so years, business investment has fallen and wage growth has been weak. If the robot revolution truly was under way, we would see surging capital expenditure and soaring productivity. Right now, that would be a nice 'problem' to have. Instead we have the reality of weak growth and stagnant pay. The real and pressing concern when it comes to the jobs market and automation is that the robots aren't taking our jobs fast enough."

And in a recent blog post Paul Krugman concluded: *

"I'd note, however, that it remains peculiar how we're simultaneously worrying that robots will take all our jobs and bemoaning the stalling out of productivity growth. What is the story, really?"

What is the story, indeed. Let me see if I can tell one. Last fall I published a book: "The Wealth of Humans". In it I set out how rapid technological progress can coincide with lousy growth in pay and productivity. Start with this:

"Low labour costs discourage investments in labour-saving technology, potentially reducing productivity growth."

...

* http://www.vox.com/2015/7/27/9038829/automation-myth

** http://www.prospectmagazine.co.uk/magazine/droids-wont-steal-your-job-they-could-make-you-rich

*** https://krugman.blogs.nytimes.com/2017/02/24/maid-in-america/

anne -> anne... , March 21, 2017 at 06:38 AM
https://twitter.com/paulkrugman/status/843167658577182725

Paul Krugman @paulkrugman

But is Ryan Avent saying something different * from the assertion that recent technological progress is capital-biased? **

* https://medium.com/@ryanavent_93844/the-productivity-paradox-aaf05e5e4aad#.kmb49lrgd

** http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots/

If so, what?

https://krugman.blogs.nytimes.com/2012/12/26/capital-biased-technological-progress-an-example-wonkish/

11:30 AM - 18 Mar 2017

anne -> anne... , March 21, 2017 at 07:00 AM
This is an old concern in economics; it's "capital-biased technological change," which tends to shift the distribution of income away from workers to the owners of capital....

-- Paul Krugman

anne -> anne... , March 21, 2017 at 06:40 AM
http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots/

December 8, 2012

Rise of the Robots
By Paul Krugman

Catherine Rampell and Nick Wingfield write about the growing evidence * for "reshoring" of manufacturing to the United States. * They cite several reasons: rising wages in Asia; lower energy costs here; higher transportation costs. In a followup piece, ** however, Rampell cites another factor: robots.

"The most valuable part of each computer, a motherboard loaded with microprocessors and memory, is already largely made with robots, according to my colleague Quentin Hardy. People do things like fitting in batteries and snapping on screens.

"As more robots are built, largely by other robots, 'assembly can be done here as well as anywhere else,' said Rob Enderle, an analyst based in San Jose, California, who has been following the computer electronics industry for a quarter-century. 'That will replace most of the workers, though you will need a few people to manage the robots.' "

Robots mean that labor costs don't matter much, so you might as well locate in advanced countries with large markets and good infrastructure (which may soon not include us, but that's another issue). On the other hand, it's not good news for workers!

This is an old concern in economics; it's "capital-biased technological change," which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn't look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on "skill bias", supposedly explaining the rising college premium.

But the college premium hasn't risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:

[Graph]

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won't do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an "opportunity society," or whatever it is the likes of Paul Ryan etc. are selling this week, won't do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn't seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism - which shouldn't be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

But I think we'd better start paying attention to those implications.

* http://www.nytimes.com/2012/12/07/technology/apple-to-resume-us-manufacturing.html

** http://economix.blogs.nytimes.com/2012/12/07/when-cheap-foreign-labor-gets-less-cheap/

anne -> anne... , March 21, 2017 at 06:43 AM
https://fred.stlouisfed.org/graph/?g=d4ZY

January 30, 2017

Compensation of employees as a share of Gross Domestic Income, 1948-2015


https://fred.stlouisfed.org/graph/?g=d507

January 30, 2017

Compensation of employees as a share of Gross Domestic Income, 1948-2015

(Indexed to 1948)

supersaurus -> anne... , March 21, 2017 at 01:23 PM
"The most valuable part of each computer, a motherboard loaded with microprocessors and memory, is already largely made with robots, according to my colleague Quentin Hardy. People do things like fitting in batteries and snapping on screens.

"...already largely made..."? already? circuit boards were almost entirely populated by machines by 1985, and after the rise of surface mount technology you could drop the "almost". in 1990 a single machine could place 40k+/hour parts small enough they were hard to pick up with fingers.

anne : , March 21, 2017 at 06:37 AM
https://krugman.blogs.nytimes.com/2017/03/20/robot-geometry-very-wonkish/

March 20, 2017

Robot Geometry (Very Wonkish)
By Paul Krugman

And now for something completely different. Ryan Avent has a nice summary * of the argument in his recent book, trying to explain how dramatic technological change can go along with stagnant real wages and slowish productivity growth. As I understand it, he's arguing that the big tech changes are happening in a limited sector of the economy, and are driving workers into lower-wage and lower-productivity occupations.

But I have to admit that I was having a bit of a hard time wrapping my mind around exactly what he's saying, or how to picture this in terms of standard economic frameworks. So I found myself wanting to see how much of his story could be captured in a small general equilibrium model - basically the kind of model I learned many years ago when studying the old trade theory.

Actually, my sense is that this kind of analysis is a bit of a lost art. There was a time when most of trade theory revolved around diagrams illustrating two-country, two-good, two-factor models; these days, not so much. And it's true that little models can be misleading, and geometric reasoning can suck you in way too much. It's also true, however, that this style of modeling can help a lot in thinking through how the pieces of an economy fit together, in ways that algebra or verbal storytelling can't.

So, an exercise in either clarification or nostalgia - not sure which - using a framework that is basically the Lerner diagram, ** adapted to a different issue.

Imagine an economy that produces only one good, but can do so using two techniques, A and B, one capital-intensive, one labor-intensive. I represent these techniques in Figure 1 by showing their unit input coefficients:

[Figure 1]

Here AB is the economy's unit isoquant, the various combinations of K and L it can use to produce one unit of output. E is the economy's factor endowment; as long as the aggregate ratio of K to L is between the factor intensities of the two techniques, both will be used. In that case, the wage-rental ratio will be the slope of the line AB.

Wait, there's more. Since any point on the line passing through A and B has the same value, the place where it hits the horizontal axis is the amount of labor it takes to buy one unit of output, the inverse of the real wage rate. And total output is the ratio of the distance along the ray to E divided by the distance to AB, so that distance is 1/GDP.

You can also derive the allocation of resources between A and B; not to clutter up the diagram even further, I show this in Figure 2, which uses the K/L ratios of the two techniques and the overall endowment E:

[Figure 2]

Now, Avent's story. I think it can be represented as technical progress in A, perhaps also making A even more capital-intensive. So this would amount to a movement southwest to a point like A' in Figure 3:

[Figure 3]

We can see right away that this will lead to a fall in the real wage, because 1/w must rise. GDP and hence productivity does rise, but maybe not by much if the economy was mostly using the labor-intensive technique.

And what about allocation of labor between sectors? We can see this in Figure 4, where capital-using technical progress in A actually leads to a higher share of the work force being employed in labor-intensive B:

[Figure 4]

So yes, it is possible for a simple general equilibrium analysis to capture a lot of what Avent is saying. That does not, of course, mean that he's empirically right. And there are other things in his argument, such as hypothesized effects on the direction of innovation, that aren't in here.

But I, at least, find this way of looking at it somewhat clarifying - which, to be honest, may say more about my weirdness and intellectual age than it does about the subject.

* https://medium.com/@ryanavent_93844/the-productivity-paradox-aaf05e5e4aad#.v9et5b98y

** http://www-personal.umich.edu/~alandear/writings/Lerner.pdf

Shah of Bratpuhr : , March 21, 2017 at 07:27 AM
Median Wealth per adult (table ends at $40k)

1. Switzerland $244,002
2. Iceland $188,088
3. Australia $162,815
4. Belgium $154,815
5. New Zealand $135,755
6. Norway $135,012
7. Luxembourg $125,452
8. Japan $120,493
9. United Kingdom $107,865
10. Italy $104,105
11. Singapore $101,386
12. France $ 99,923
13. Canada $ 96,664
14. Netherlands $ 81,118
15. Ireland $ 80,668
16. Qatar $ 74,820
17. Korea $ 64,686
18. Taiwan $ 63,134
19. United Arab Emirates $ 62,332
20. Spain $ 56,500
21. Malta $ 54,562
22. Israel $ 54,384
23. Greece $ 53,266
24. Austria $ 52,519
25. Finland $ 52,427
26. Denmark $ 52,279
27. United States $ 44,977
28. Germany $ 42,833
29. Kuwait $ 40,803

http://www.middleclasspoliticaleconomist.com/2017/03/us-has-worst-wealth-inequality-of-any.html

reason -> Shah of Bratpuhr... , March 21, 2017 at 08:17 AM
I think this illustrates my point very clearly. If you had charts of wealth by age it would be even clearer. Without a knowledge of the discounted expected value of public pensions it is hard to draw any conclusions from this list.

I know very definitely that in Australia and the UK people are very reliant on superannuation and housing assets. In both Australia and the UK it is common to sell expensive housing in the capital and move to cheaper coastal locations upon retirement, investing the capital to provide retirement income. Hence a larger median wealth is NEEDED.

It is hard otherwise to explain the much higher median wealth in Australia and the UK.

Shah of Bratpuhr : , March 21, 2017 at 07:28 AM
Median Wealth Average Wealth

1. United States $ 44,977 $344,692 7.66
2. Denmark $ 52,279 $259,816 4.97
3. Germany $ 42,833 $185,175 4.32
4. Austria $ 52,519 $206,002 3.92
5. Israel $ 54,384 $176,263 3.24
6. Kuwait $ 40,803 $119,038 2.92
7. Finland $ 52,427 $146,733 2.80
8. Canada $ 96,664 $270,179 2.80
9. Taiwan $ 63,134 $172,847 2.74
10. Singapore $101,386 $276,885 2.73
11. United Kingdom $107,865 $288,808 2.68
12. Ireland $ 80,668 $214,589 2.66
13. Luxembourg $125,452 $316,466 2.52
14. Korea $ 64,686 $159,914 2.47
15. France $ 99,923 $244,365 2.45
16. United Arab Emirates $ 62,332 $151,098 2.42
17. Norway $135,012 $312,339 2.31
18. Australia $162,815 $375,573 2.31
19. Switzerland $244,002 $561,854 2.30
20. Netherlands $ 81,118 $184,378 2.27
21. New Zealand $135,755 $298,930 2.20
22. Iceland $188,088 $408,595 2.17
23. Qatar $ 74,820 $161,666 2.16
24. Malta $ 54,562 $116,185 2.13
25. Spain $ 56,500 $116,320 2.06
26. Greece $ 53,266 $103,569 1.94
27. Italy $104,105 $202,288 1.94
28. Japan $120,493 $230,946 1.92
29. Belgium $154,815 $270,613 1.75

http://www.middleclasspoliticaleconomist.com/2017/03/us-has-worst-wealth-inequality-of-any.html

spencer : , March 21, 2017 at 08:06 AM
Ryan Avent's analysis demonstrates what is wrong with the libertarian, right wing belief that cheap labor is the answer to every problem when in truth cheap labor is the source of many of our problems.
reason -> spencer... , March 21, 2017 at 08:22 AM
Spencer,
as I have said before, I don't really care to much what wages are - I care about income. It is low income that is the problem. I'm a UBI guy, if money is spread around, and workers can say no to exploitation, low wages will not be a problem.
Sanjait : , March 21, 2017 at 09:32 AM
This looks good, but also reductive.

Have we not seen a massive shift in pretax income distribution? Yes ... which tells me that changes in tax rate structures are not the only culprit. Though they are an important culprit.

reason -> Sanjait... , March 21, 2017 at 09:40 AM
Maybe - but
1. changes in taxes can affect incentives (especially think of real investment and corporate taxes and also personal income taxes and executive remuneration);
2. changes in the distribution of purchasing power can effect the way growth in the economy occurs;
3. changes in taxes also affect government spending and government spending tends to be more progressively distributed than private income.

Remember the rule: ceteris is NEVER paribus.

Longtooth : , March 21, 2017 at 12:28 PM
Word to the wise:

Think: Services and Goods

Composite Services labor hours increase with poor productivity growth - output per hour of labor input. Composite measure of service industry output is notoriously problematic (per BLS BEA).

Goods labor hours decrease with increasing productivity growth. Goods output per hour easy to measure and with the greatest experience and knowledge.

Put this together and composite national productivity growth rate can't grow as fast as services consume more of labor hours.

Simple arithmetic.

Elaboration on Services productivity measures:

Now add the composite retail clerk labor hours to engineering labor hours... which dominates in composite labor hours? Duh! So even in services the productivity is weighted heavily to the lowest productivity job market.

Substitute Hospitality services for Retail Clerk services. Substitute truck drivers services for Hospitality Services, etc., etc., etc.

I have spent years tracking productivity in goods production of various types ... mining, non-tech hardware production, high tech hardware production in various sectors of high tech. The present rates of productivity growth continue to climb (never decline) relative to the past rates in each goods production sector measured by themselves.

But the proportion of hours in goods production in U.S. is and has been in continual decline even while value of output has increased in each sector of goods production.

Here's an interesting way to start thinking about Services productivity.

There used to be reasonably large services sector in leisure and business travel agents. Now there is nearly none... this has been replaced by on-line computer based booking. So travel agent or equivalent labor hours is now near zippo. Productivity of travel agents went through the roof in the 1990's & 2000's as the number of people / labor hours dropped like a rock. Where did those labor hours end up? They went to lower paying services or left the labor market entirely. So lower paying lower productivity services increased as a proportion of all services, which in composite reduced total serviced productivity.

You can do the same analysis for hundreds of service jobs that no longer even exist at all --- switch board operators for example when the way of buggy whip makers and horse-shoe services).

Now take a little ride into the future... not to distant future. When autonomous vehicles become the norm or even a large proportion of vehicles, and commercial drivers (taxi's, trucking, delivery services) go the way of horse-shoe services the labor hours for those services (land transportation of goods & people) will drop precipitously, even as unit deliveries increase, productivity goes through the roof, but since there's almost no labor hours in that service the composite effect on productivity in services will drop because the displaced labor hours will end up in a lower productivity services sector or out of the elabor market entirely.

Longtooth -> Longtooth... , March 21, 2017 at 12:42 PM
Economists are having problems reconciling composite productivity growth rates with increasing rates of automation. So they end up saying "no evidence" of automation taking jobs or something to the effect "not to fear, robotics isn't evident as a problem we have to worry about".

But they know by observation all around them that automation is increasing productivity in the goods sector, so they can't really discount automation as an issue without shutting their eyes to everything they see with their "lying eyes". Thus they know deep down that they will have to be reconcile this with BLS and BEA measures.

Ten years aog this wasn't even on economist's radars. Today it's at least being looked into with more serious effort.

Ten years ago politicians weren't even aware of the possibility of any issues with increasing rates of automation... they thought it's always increased with increasing labor demand and growth, so why would that ever change? Ten years ago they concluded it couldn't without even thinking about it for a moment. Today it's on their radar at least as something that bears perhaps a little more thought.

Not to worry though... in ten more years they'll either have real reason to worry staring them in the face, or they'll have figured out why they were so blind before.

Reminds me of not recognizing the "shadow banking" enterprises that they didn't see either until after the fact.

Longtooth -> Longtooth... , March 21, 2017 at 12:48 PM
Or that they thought the risk rating agencies were providing independent and valid risk analysis so the economists couldn't reconcile the "low level" of market risks risk with everything else so they just assumed "everything" else was really ok too... must be "irrational exuberance" that's to blame.
Longtooth : , March 21, 2017 at 01:04 PM
Let me add that the term "robotics" is a subset of automation. The major distinction is only that a form of automation that includes some type of 'articulation' and/or some type of dynamic decision making on the fly (computational branching decision making in nano second speeds) is termed 'robotics' because articulation and dynamic decision making are associated with human capabilities rather then automatic machines.

It makes no difference whether productivity gains occur by an articulated machine or one that isn't... automation just means replacing people's labor with something that improves humans capacity to produce an output.

When mechanical leverage was invented 3000 or more years ago it was a form of automation, enabling humans to lift, move heavier objects with less human effort (less human energy).

Longtooth -> Longtooth... , March 21, 2017 at 01:18 PM
I meant 3000 years BC.... 5000 years ago or more.

[Mar 19, 2017] When inequality is driven by extremes at the tail, using median means that you dont see much change in the demographics

Mar 19, 2017 | economistsview.typepad.com
libezkova : March 16, 2017 at 09:51 PM , 2017 at 09:51 PM
"the U.S. middle class - with household incomes ranging from two-thirds to double the national median"

Median household income in the US in 2015 was less the $60K. Two-thirds is $40K. That's almost poverty not middle class.

Sociologically the middle class is a quasi-elite of professionals and managers, who are largely immune to economic downturns and trends such as out-sourcing.

reason -> libezkova... , March 17, 2017 at 04:24 AM
The definition game? Define something to something else as is being talked about and then claim, claims based on a completely different definition are false?
Lyle -> libezkova... , March 17, 2017 at 12:47 PM
Actually with the change in ratio professionals and managers now tend to upper middle class, (29% of us is upper middle now, 32% middle).

One of the influences is that post WWII it was possible to be middle class and work on an assembly line in a job that was described as check your brain at the door. Automation and process changes have wiped the high pay of such jobs out. Steel makers for example thru mainly process changes (electric furnaces using scrap, continuous casting and the like) mean that it takes 1/5 the hours to produce a ton of steel in did in the 1970s.

The movement of assembly line jobs to the middle class occured because there was a period where the US was much less involved with the rest of the world economically, because their industries had all been destroyed. The change started during the Johnson admin, and showed up in the high inflation of the Nixon admin.

cm -> libezkova... , March 17, 2017 at 10:48 PM
Most "professionals and managers" are nowhere near being immune to downturns and outsourcing, in aggregate.

You could likewise claim that "low skilled" or any other occupations are "immune" as somewhere around 70-80% of their members continue being employed through tough times, in aggregate.

If you take "tech", companies laying off around 5-10% or even more of their staff in busts is a frequent enough occurrence. And that's in addition to the "regular" age discrimination and cycling of workers justified with "outdated skills". Being young and (supposedly) impressionable is a skill!

D. C. Sessions -> libezkova... , March 18, 2017 at 10:16 AM
"the U.S. middle class - with household incomes ranging from two-thirds to double the national median"

That's almost tautological. By definition, there can't be a whole lot of change in the population of groups defined relative to median. Income and wealth of those groups, though, can be enlightening.

Substitute "mean" for "median" and watch what happens. When inequality is driven by extremes at the tail, using "median" means that you don't see much change in the demographics. (Hint: if "middle class" is defined as half to twice the average income, there are damned few in that bracket.)

[Mar 18, 2017] The Role of Experts in Public Debate

Notable quotes:
"... Economist James K. Galbraith disputes these claims of the benefit of comparative advantage. He states that "free trade has attained the status of a god" and that ". . . none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." He argues that ". . . comparative advantage is based upon the concept of constant returns: the idea that you can double or triple the output of any good simply by doubling or tripling the inputs. But this is not generally the case. For manufactured products, increasing returns, learning, and technical change are the rule, not the exception; the cost of production falls with experience. With increasing returns, the lowest cost will be incurred by the country that starts earliest and moves fastest on any particular line. Potential competitors have to protect their own industries if they wish them to survive long enough to achieve competitive scale."[42] ..."
"... Galbraith, as always, is very succinct and readable. I well remember sitting in an economics lecture in the 1980's when the Professor mentioned Galbraith and described him as with distain someone 'who's ideas were more popular with the public than with economists'. The snigger of agreement that ran around the students in the hall made me realise just how ingrained the ideology of economics was as I'm pretty sure I was the only one of the students who'd actually read any Galbraith. ..."
"... I'd also recommend Ha-Joon Chang as someone who is very readable on the topic of the many weaknesses of conventional ideas on comparative advantage. ..."
"... "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness." ..."
"... I've noticed many experts are especially bad at verbosity. Maybe they think somehow that quantity of words is a form of potency. Maybe that's it. Also individuals with a grievance who write posts about their grievance. I know when I have a grievance it's hard to shut up. I'm just being honest. I'll keep rambling and rambling, repeating myelf and fulminating. Thankfully I know better than to write like that. ..."
"... Thing 13: Making rich people richer doesn't make the rest of us richer. Trickle down economics doesn't work because wealth doesn't trickle down. It trickles up, which is why the rich are the rich in the first place ..."
"... Thing 23: Good economic policy does not require good economists. Most of the really important economic issues, the ones that decide whether nations sink or swim, are within the intellectual reach of intelligent non-economists. Academic Economics with a capital "E" has remarkably little to say about the things that really matter. Concerned citizens need to stop being intimidated by the experts here. ..."
"... Although Ha Joon Chang is an excellent economist, I would also strongly recommend Michael Hudson, Michael Perelman, Steve Keen and E. Ray Canterbery - they are really great, along with Samir Amin of Senegal. ..."
"... A major issue is that those incapable politicians do rely upon experts, but they have consistently selected experts not on their track record (such as how good economists were at predicting the evolution of the economy, or how good political scientists were at predicting the evolution of communist or Arab societies), but on whether pronouncements of experts corresponded to their ideological preconceptions and justified their intended policies. ..."
"... A bit like rejecting physicians' diagnoses when they do not suit you and preferring the cure of a quack. ..."
"... This is not restricted to economists, it pervasive in science in general. I can't remember how many times I got a paper for peer review where I couldn't figure out what the person was trying to say because they layered the jargon ten levels deep. ..."
"... I think it is as simple as: if you create something that justifies the behaviors of the rich and powerful, you have something to sell and willing buyers. If you create something that delegitimizes the behaviors of the rich and powerful, you not only have no willing patrons but you have made powerful enemies. ..."
"... It is the law of supply and demand for pretentious bullshit. ..."
"... Leave workers exposed to starvation long enough and they'll work for next- to-nothing. The solution to James O'Connor's Fiscal Crisis of the State is to clean house in a big way, a very big way. Put everyone out on the street and start all over again. (Everyone but the 1% of course.) ..."
"... It's Andrew Mellon's advice for getting out of the Depression: "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people." ..."
"... The Reserve Army of Labor saves the Capitalist Day, once again. (Except for the little problem that the 1% won't accept their own liquidation, so Goldman Sachs and the rest must be exempted from the purging–which means that the purging can't work.) ..."
"... Not too long before he died, Paul Samuelson said: "Maybe I was wrong on the subject of jobs offshoring." (I.e., maybe offshoring all the jobs and dismantling the US economy wasn't so intelligent after all!) ..."
"... C. Wright Mills called them "crackpot realists." ..."
"... It's all a part and parcel of the meritocracy. If you don't have a degree in Econ, your opinion doesn't matter about why your job moved to China. If you don't have a degree in Urban Planning, you don't get to comment on how the city wants to tear down the park and put up condos. ..."
"... Their advice helped lead to this 2008 Financial Crisis. The promise of neoliberalism was faster growth. It did not happen. Quite the opposite. It gave the rich intellectual cover to loot society. That"s what this was always about. ..."
"... Then there's the matter of the Iraq War. Another example. Many foreign policy "experts", particularly affiliated with the neoconservative assured the American people that invading Iraq would be easy to do and lead to lots of long term benefits. Others insisted, despite evidence to the contrary, that Saddam was developing weapons of mass destruction. Now look at where we are. No WMDs, long and cost war, with no long-term solutions. Many of said "experts" later endorsed Clinton. ..."
"... We do not need pro-Establishment experts who sell themselves out to enrich themselves. We need experts who act in the public interest. ..."
Mar 18, 2017 | www.nakedcapitalism.com

By Sandwichman. Originally published at Angry Bear

Jonathan Portes asks, " What's the role of experts in the public debate? " He assumes it is his prerogative, as an expert, to define that role:

I think we have three really important functions.

First, to explain our basic concepts and most important insights in plain English. Famously, Paul Samuelson, the founder of modern macroeconomics, was asked whether economics told us anything that was true but not obvious. It took him a couple of years, but eventually he gave an excellent and topical example – simply the theory of comparative advantage.

Similarly, I often say that the most useful thing I did in my 6 years as Chief Economist at DWP was to explain the lump of labour fallacy – that there isn't a fixed number of jobs in the economy, and increased immigration or more women working adds to both labour demand and labour supply – to six successive Secretaries of State. So that's the first.

Second is to call bullshit.

O.K. I call bullshit. What Portes explained "to six successive Secretaries of State" was a figment of the imagination of a late 18th century Lancashire magistrate, a self-styled " friend to the poor " who couldn't understand why poor people got so upset about having their wages cut or losing their jobs - to the extent they would go around throwing rocks through windows, breaking machines and burning down factories - when it was obvious to him that it was all for the best and in the long run we would all be better off or else dead.

I call bullshit because what Portes explained to six successive Secretaries of State was simply the return of the repressed - the obverse of "Say's Law" (which was neither Say's nor a Law) that "supply creates its own demand," which John Maynard Keynes demolished in The General Theory of Employment, Interest and Money and that John Kenneth Galbraith subsequently declared " sank without trace " in the wake of Keynes's demolition of it.

I call bullshit because when Paul Samuelson resurrected the defunct fallacy claim that Portes explained to six successive Secretaries of State, he did so on the condition that governments pursued the sorts of "Keynesian" job-creating policies that the discredited principle of "supply creates its own demand" insisted were both unnecessary and counter-productive.

But the lump of labor argument implies that there is only so much useful remunerative work to be done in any economic system, and that is indeed a fallacy . If proper and sound monetary, fiscal, and pricing policies are being vigorously promulgated , we need not resign ourselves to mass unemployment. And although technological unemployment is not to be shrugged off lightly, its optimal solution lies in offsetting policies that create adequate job opportunities and new skills.

[Incidentally, as Robert Schiller has noted, the promised prevention of mass unemployment by vigorous policy intervention did not imply the preservation of wage levels. Schiller cited the following passage from the Samuelson textbook, " a decrease in the demand for a particular kind of labor because of technological shifts in an industry can he adapted to - lower relative wages and migration of labor and capital will eventually provide new jobs for the displaced workers."]

I call bullshit because what Portes explained to six successive Secretaries of State was not even Paul Samuelson's policy-animated zombie lump-of-labour fallacy but a supply-side, anti-inflationary retrofit cobbled together by Richard Layard and associates and touted by Tony Blair and Gerhard Schroeder as the Third Way " new supply-side agenda for the left. " Central to that agenda were tax cuts to promote economic growth and "active labour market policies" to foster non-inflationary expansion of employment by making conditions more "flexible" and lower-waged:

Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs.

Encourage employers to offer 'entry' jobs to the labour market by lowering the burden of tax and social security contributions on low-paid jobs.

Adjustment will be the easier, the more labour and product markets are working properly. Barriers to employment in relatively low productivity sectors need to be lowered if employees displaced by the productivity gains that are an inherent feature of structural change are to find jobs elsewhere. The labour market needs a low-wage sector in order to make low-skill jobs available.

I call bullshit because in defending the outcomes of supply-side labour policies, Portes soft-pedaled the stated low-wage objectives of the Third Way agenda. In a London Review of Books review, Portes admitted that "it may drive down wages for the low-skilled, but the effect is small compared to that of other factors (technological change, the national minimum wage and so on)." In the Third Way supply-side agenda, however, a low-wage sector was promoted as a desirable feature - making more low-skill jobs available - not a trivial bug to be brushed aside. In other words, in "driving down wages for the low skilled" the policy was achieving exactly what it was intended to but Portes was "too discreet" to admit that was the stated objectives of the policy.

dk , March 18, 2017 at 4:47 am

I found this helpful in better understanding the economics discussed:
https://en.wikipedia.org/wiki/Comparative_advantage#Criticism

Economist James K. Galbraith disputes these claims of the benefit of comparative advantage. He states that "free trade has attained the status of a god" and that ". . . none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." He argues that ". . . comparative advantage is based upon the concept of constant returns: the idea that you can double or triple the output of any good simply by doubling or tripling the inputs. But this is not generally the case. For manufactured products, increasing returns, learning, and technical change are the rule, not the exception; the cost of production falls with experience. With increasing returns, the lowest cost will be incurred by the country that starts earliest and moves fastest on any particular line. Potential competitors have to protect their own industries if they wish them to survive long enough to achieve competitive scale."[42]

Galbraith also contends that "For most other commodities, where land or ecology places limits on the expansion of capacity, the opposite condition – diminishing returns – is the rule. In this situation, there can be no guarantee that an advantage of relative cost will persist once specialization and the resultant expansion of production take place. A classic and tragic example, studied by Erik Reinert, is transitional Mongolia, a vast grassland with a tiny population and no industry that could compete on world markets. To the World Bank, Mongolia seemed a classic case of comparative advantage in animal husbandry, which in Mongolia consisted of vast herds of cattle, camels, sheep, and goats. Opening of industrial markets collapsed domestic industry, while privatization of the herds prompted the herders to increase their size. This led, within just a few years in the early 1990s, to overgrazing and permanent desertification of the subarctic steppe and, with a slightly colder than normal winter, a massive famine in the herds."

PlutoniumKun , March 18, 2017 at 5:45 am

Galbraith, as always, is very succinct and readable. I well remember sitting in an economics lecture in the 1980's when the Professor mentioned Galbraith and described him as with distain someone 'who's ideas were more popular with the public than with economists'. The snigger of agreement that ran around the students in the hall made me realise just how ingrained the ideology of economics was as I'm pretty sure I was the only one of the students who'd actually read any Galbraith.

I'd also recommend Ha-Joon Chang as someone who is very readable on the topic of the many weaknesses of conventional ideas on comparative advantage.

/L , March 18, 2017 at 6:39 am

James K Galbraith is the son of the famous New Deal economist John K Galbraith.

John K G:

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

"In the case of economics there are no important propositions that cannot be stated in plain language."

/L , March 18, 2017 at 7:10 am

John K G on The Art of Good Writing

"I was an editor of Fortune under Henry Luce, the founder of Time, Inc., who was one of the most ruthless editors that I have ever known, that anyone has ever known. Henry could look over a sheet of copy and say, "This can go, and this can go, and this can go," and you would be left with eight to ten lines which said everything that you had said in twenty lines before.

And I can still, to this day, not write a page without the feeling that Henry Luce is looking over my shoulder and saying, "That can go." That illuminate one "problem" in our age of internet, unlimited space to be verbose and no editors that de-obscure the writers "thoughts".

JEHR , March 18, 2017 at 8:24 am

/L–This site is just wonderful! Anything you want to know about knowing seems to be here. Thanks for the great link.

sgt_doom , March 18, 2017 at 2:21 pm

Recommendation: Wealth, Power and the Crisis of Laissez-Faire Capitalism , by Donald Gibson

Norb , March 18, 2017 at 8:54 am

I wonder if this phenomenon – the desirability succinct communication -- was a holdover of earlier times, when accurate communication made the difference between life and death. Settling and developing a continent would place a high value on such purposeful human exchanges.

Today, we are awash in branding and marketing intended to maintain the current order. The language is used to obfuscate, not clarify experience or goals.

An expert in any field that has the ability to communicate in a general , popular mode, is of great value to society. Truth and understanding is its main function. Knowledge, or insight that cannot be shared is more often than not just an excuse to hide methods of control and exploitation.

If citizens can't get the generalities right, the specifics will be impossible to comprehend.

craazyman , March 18, 2017 at 5:23 pm

Almost everything can go. I remember seeing a video of the photographer William Klein saying a master photographer is remembered for just a handfull of images. Maybe 10 or 15, tops. Out of probably at least 100,000 serious photos.

Of course what goes is necessary fertilizer for what doesn't go. You can't avoid it. Hahahah. But you have to let it go anyway. Or your editor has to be williing to cut.

I've noticed lots and lots of posts here could be a lot better if the post author had said the same thing in half as many words. Most wouldn't lose any persuasion, if they had any to begin with. And they'd gain reader attention for the pruning.

I've noticed many experts are especially bad at verbosity. Maybe they think somehow that quantity of words is a form of potency. Maybe that's it. Also individuals with a grievance who write posts about their grievance. I know when I have a grievance it's hard to shut up. I'm just being honest. I'll keep rambling and rambling, repeating myelf and fulminating. Thankfully I know better than to write like that.

Having saidd all that, Say was rite. If the supply of labor increases, that createes its own demand for jobs! How is that not completely obvious.

PlutoniumKun , March 18, 2017 at 9:18 am

Ah yeah, sorry, getting my JK's mixed up. Both are good.

fresno dan , March 18, 2017 at 7:03 am

PlutoniumKun
March 18, 2017 at 5:45 am

Huffington Post review has a synopsis of the Ha-Joon Change book. http://www.huffingtonpost.com/ian-fletcher/a-review-of-ha-joon-chang_b_840417.html
My favorite:
Thing 13: Making rich people richer doesn't make the rest of us richer. Trickle down economics doesn't work because wealth doesn't trickle down. It trickles up, which is why the rich are the rich in the first place

shinola , March 18, 2017 at 12:55 pm

Thanks for the tip PK & thank you fd for the link to the review. I'm going to check this fellow out; sounds like he has some interesting things to say. One of the "things" that may apply to the above article:

Thing 23: Good economic policy does not require good economists. Most of the really important economic issues, the ones that decide whether nations sink or swim, are within the intellectual reach of intelligent non-economists. Academic Economics with a capital "E" has remarkably little to say about the things that really matter. Concerned citizens need to stop being intimidated by the experts here.

sgt_doom , March 18, 2017 at 2:18 pm

Although Ha Joon Chang is an excellent economist, I would also strongly recommend Michael Hudson, Michael Perelman, Steve Keen and E. Ray Canterbery - they are really great, along with Samir Amin of Senegal.

Anonymous2 , March 18, 2017 at 8:10 am

A word of warning from the UK. Denigrate experts too much and you end up like us with government by people who really are inexpert. That is not an improvement.

Mael Colium , March 18, 2017 at 8:39 am

Ha! I think an anti brexiter just rolled the white eye.

Strange that the awful things that the experts told us all would happen haven't and don't look like happening since the people called bullshit on the EU mess. Britain with or without those blokes in dresses up north will do just fine as they steer themselves out of the EU quagmire. I'll take the people anytime anonymous – they have more common sense than the experts. Didn't you read the article?

Anonymous2 , March 18, 2017 at 9:51 am

If you are referring to economic forecasters, they, by definition, are not experts.

sgt_doom , March 18, 2017 at 2:16 pm

Thank you!!!

I remember back in the 1980s, when so-called "experts" were prattling about such nonsense as . . .

"Computers don't make mistakes, humans make mistakes !"

Which was surely untrue as anyone with any real IT expertise back then would have explained that 97% or more of hardware crashes generate software problems (for obvious reasons).

visitor , March 18, 2017 at 9:16 am

A major issue is that those incapable politicians do rely upon experts, but they have consistently selected experts not on their track record (such as how good economists were at predicting the evolution of the economy, or how good political scientists were at predicting the evolution of communist or Arab societies), but on whether pronouncements of experts corresponded to their ideological preconceptions and justified their intended policies.

A bit like rejecting physicians' diagnoses when they do not suit you and preferring the cure of a quack.

voislav , March 18, 2017 at 8:28 am

This is not restricted to economists, it pervasive in science in general. I can't remember how many times I got a paper for peer review where I couldn't figure out what the person was trying to say because they layered the jargon ten levels deep. This is in chemistry, so things are typically straightforward, no need for convoluted explanations and massaging of the data.

But people still do it because that's the culture that they've been educated in, a scientific paper has to be high-brow, using obscure words and complicated sentences.

Steve Ruis , March 18, 2017 at 8:55 am

I think it is as simple as: if you create something that justifies the behaviors of the rich and powerful, you have something to sell and willing buyers. If you create something that delegitimizes the behaviors of the rich and powerful, you not only have no willing patrons but you have made powerful enemies.

It is the law of supply and demand for pretentious bullshit.

Paul Hirschman , March 18, 2017 at 9:03 am

So in the end, we wind up with Say's Law anyway, since creating a "low wages" sector is exactly how Say's Law functions–supply creates its own demand because declining wages means investment spending can increase, which keeps aggregate demand where it needs to be for full employment.

This is the solution, we are told, to Keynes "sticky prices." Jim Grant makes this very argument in his book about the "short-lived" crisis of the early 1920s. Leave workers exposed to starvation long enough and they'll work for next- to-nothing. The solution to James O'Connor's Fiscal Crisis of the State is to clean house in a big way, a very big way. Put everyone out on the street and start all over again. (Everyone but the 1% of course.)

It's Andrew Mellon's advice for getting out of the Depression: "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

The Reserve Army of Labor saves the Capitalist Day, once again. (Except for the little problem that the 1% won't accept their own liquidation, so Goldman Sachs and the rest must be exempted from the purging–which means that the purging can't work.)

Back to managing stagnation.

Paul Hirschman , March 18, 2017 at 9:09 am

Managing stagnation is what we have "experts" for in the first place.

sgt_doom , March 18, 2017 at 2:12 pm

Not too long before he died, Paul Samuelson said: "Maybe I was wrong on the subject of jobs offshoring." (I.e., maybe offshoring all the jobs and dismantling the US economy wasn't so intelligent after all!)

Just finished a book called, The Death of Expertise , by a professor of national security (oh give me a frigging break!!!!), Tom Nichols.

Biggest pile of crapola I have ever read! The author was also yearning for the days when "experts" were blindly followed!

Sandwichman , March 18, 2017 at 2:38 pm

C. Wright Mills called them "crackpot realists."

marku52 , March 18, 2017 at 3:25 pm

It's all a part and parcel of the meritocracy. If you don't have a degree in Econ, your opinion doesn't matter about why your job moved to China. If you don't have a degree in Urban Planning, you don't get to comment on how the city wants to tear down the park and put up condos.

Altandmain , March 18, 2017 at 5:00 pm

The answer is that said "experts" have failed the general public miserably.

Their advice helped lead to this 2008 Financial Crisis. The promise of neoliberalism was faster growth. It did not happen. Quite the opposite. It gave the rich intellectual cover to loot society. That"s what this was always about.

Now people wonder, why they don't trust "experts"?

Then there's the matter of the Iraq War. Another example. Many foreign policy "experts", particularly affiliated with the neoconservative assured the American people that invading Iraq would be easy to do and lead to lots of long term benefits. Others insisted, despite evidence to the contrary, that Saddam was developing weapons of mass destruction. Now look at where we are. No WMDs, long and cost war, with no long-term solutions. Many of said "experts" later endorsed Clinton.

We do not need pro-Establishment experts who sell themselves out to enrich themselves. We need experts who act in the public interest.

[Mar 17, 2017] "Meals on Wheels America," one such national meal delivery program, says the organization can provide meals for senior citizens for one year for roughly the same cost as just

Mar 17, 2017 | economistsview.typepad.com
im1dc : March 16, 2017 at 11:16 AM

, 2017 at 11:16 AM
OMG, to give himself and his $Billionaire buddies a big tax break Trump's Budget cuts Meals on Wheels programs that feed the elderly and disabled...

How cold and cruel is this man?

http://www.marketwatch.com/story/this-is-how-much-it-costs-meals-on-wheels-to-feed-one-elderly-person-for-a-year-2017-03-16

"This is how much it costs 'Meals on Wheels' to feed one elderly person for a year"

By Quentin Fottrell, Personal Finance Editor...Mar 16, 2017...1:01 p.m. ET

"Among the services that could be impacted under President Trump's budget proposals: Meals on Wheels.

The administration's cuts target the Department of Housing and Urban Development and call for the elimination of the $3 billion Community Development Block Grant, which helps fund programs including Meals on Wheels services, which deliver food (and human interaction) to elderly, disabled and poor recipients. "The federal government has spent over $150 billion on this block grant since its inception in 1974, but the program is not well-targeted to the poorest populations and has not demonstrated results," the budget proposal states. "The budget devolves community and economic development activities to the state and local level, and redirects federal resources to other activities."

"Meals on Wheels America," one such national meal delivery program, says the organization can provide meals for senior citizens for one year for roughly the same cost as just one day in a hospital. The annual meal cost is $2,765 for 250 days, while the cost of one day in the hospital is around $2,271, according to the Henry J. Kaiser Family Foundation, a nonprofit, private operating foundation based in Menlo Park, Calif. For "Meals on Wheels People," a Portland, Ore.-based service and one of the largest in the country, says it costs us around $2,500 annually to provide daily meals to a homebound senior, while cost of institutional care for a year in Oregon is around $60,000."...

[Mar 17, 2017] The rise of elite dynasties, economic inequality, and the vast concentrations of global wealth in recent times means that the role of the family office in our society demands

Mar 17, 2017 | economistsview.typepad.com
im1dc : March 16, 2017 at 09:55 AM

, 2017 at 09:55 AM
"Ultra-rich protect wealth with spread of 'family offices'"

Not really a new idea. The Rockefeller Family and one or two others had these from early days of American Dynastic Wealth, however, what is new is the number of wealthy and the amount of wealth they control, not only within a nation but Globally which makes them a new threat to global prosperity and equality - iow, they won't share theirs willingly and must be forced to pay up, the Anti-Trump way.

http://www.bbc.com/news/education-39285037

"Ultra-rich protect wealth with spread of 'family offices'"

By Sean Coughlan, Education correspondent...BBC...16 March 2017

"The ultra-rich in London are increasingly protecting their wealth through the use of "family offices", says research from the London School of Economics.

These are teams of professionals - such as lawyers, financiers and psychologists - employed to ensure the "dynastic wealth" of the super-rich.

These offices work for families worth at least £200m, says the study.

Researcher Luna Glucksberg says their role "demands scrutiny".

The study, from the LSE's International Inequalities Institute, says more attention should be paid to the rise of such "shadowy" family offices, which are employed full-time to protect the interests of their "elite families".

The study describes how they support a "bunkered" and "fortified" way of life of the "global super-rich".

Family offices have grown alongside the concentrations of the ultra-rich in cities such as London - and researchers say they have moved on a step from buying in specialist advisers.

These are full-time professional staff, which could include investment experts, property advisers, economists, trust fund advisers and lawyers, who work for a single family, in the way that a corporation might have its own dedicated staff.

The study quotes a US report from 2010 that found that 50 of the wealthiest such family offices were looking after $500bn (£407bn).

Rather than getting external advice from bankers and financiers, these family offices will keep such information private and in-house.

Their role "goes far beyond that of private bankers", says Dr Glucksberg.

"They are about creating dynasties, ensuring generational transfers of wealth," she says.

As well as maximising financial interests and investments, such family offices can look after every aspect of the private lives of their employers.

This can be everything from buying clothes and organising holidays to arranging divorces and making financial arrangements to prevent money being lost to in-laws.

The study says that for an individual family to have a family office, they would need to be worth at least £200m and probably much more.

But there are cases of "multi-family offices" - where families worth from £80m upwards could share such services.

The growth of extreme wealth, alongside poverty and low-income families, means that there needs to be more analysis of how such wealth is perpetuated, the study suggests.

These family offices "play a crucial role" in how advantages are handed on between generations, with full-time staff able to make long-term, strategic planning, says the study.

"The rise of elite dynasties, economic inequality, and the vast concentrations of global wealth in recent times means that the role of the 'family office' in our society demands scrutiny," says Dr Glucksberg."

[Mar 17, 2017] America's Two-Track Economy

Mar 17, 2017 | economistsview.typepad.com
Median household income in the USA in 2015 was $ 53,889. Census money income is defined as income received on a regular basis before payments for taxes, social security, etc. and does not reflect noncash benefits....
Peter Dizikes at the MIT News Office:
America's two-track economy : For many people in America, being middle class isn't what it used to be.
Consider: In 1971, the U.S. middle class - with household incomes ranging from two-thirds to double the national median - accounted for almost 60 percent of total U.S. earnings. But in 2014, middle-class households earned just about 40 percent of the total national income. And, adjusted for inflation, the incomes of goods-producing workers have been flat since the mid-1970s.
"We have a fractured society," says MIT economist Peter Temin. "The middle class is vanishing."
Now Temin, the Elisha Gray II Professor Emeritus of Economics in MIT's Department of Economics, has written a book exploring the topic. "The Vanishing Middle Class: Prejudice and Power in a Dual Economy," published this month by MIT Press, examines the plight of middle-income earners and offers some prescriptions for changing our current state of affairs.
The "dual economy" in the book's title also represents a bracing reflection of America's class schism. Temin, a leading economic historian, draws the term from the work of Nobel Prize winner W. Arthur Lewis, who in the 1950s applied the model of a dual economy to developing countries. In many of those nations, Lewis contended, there was not a single economy but a two-track economy, with one part containing upwardly-mobile, skilled workers and the other part inhabited by subsistence workers.
Applied to the U.S. today, "The Lewis model actually works," Temin says. "The economy can grow, but it detaches from the [subsistence] sector. Simple as it is, the Lewis model offers the benefit that a good economic model does, which is to clarify your thinking."
In Temin's terms, updated, America now features what he calls the "FTE sector" - people who work in finance, technology, and electronics - and "the low-wage sector." Workers in the first sector tend to thrive; workers in the second sector usually struggle. Much of the book delves into how the U.S. has developed this way over the last 40 years, and how it might transform itself back into a country with one economy for all.
Headwinds for workers
As Temin sees it, there are multiple reasons for the decline in middle-class earning power. To cite one: The decline of unionization, he contends, has reduced the bargaining power available to middle class workers.
"In the [political and economic] turmoil of the '70s and '80s, the unions declined, and the institutions that had been keeping labor going along with rising productivity were destroyed," Temin says. "It's partly [due to] new technology, globalization, and public policy - it's all of these things. What it did was disconnect wages from the growth in productivity."
Indeed, from about 1945 until 1975, as Temin documents in the book, U.S. productivity gains and the wage gains of goods-producing workers tracked each other closely. But since 1975, productivity has roughly doubled, while those wages have stayed flat.
Where "The Vanishing Middle Class" moves well beyond a discussion of basic economic relations, however, is in Temin's insistence that readers consider the interaction of racial politics and economics. As he puts it in the book, "Race plays an important part in discussions of politics related to inequality in the United States."
To take one example: Again starting in the 1970s, incarceration policies led to an increasing proportion of African-Americans being jailed. Today, Temin notes, about one in three African-American men will serve jail time, which he calls "a very striking figure. You can see how that would just destroy the fabric of a community." After all, those who become imprisoned see a significant reduction in their ability to obtain healthy incomes over their lifetimes.
For that matter, Temin observes, incarceration has expanded so dramatically it has affected the ability of society to pay for prisons, which may be a factor that limits their further growth. At the moment, he notes in the book, the U.S. states pay roughly $50 billion a year for prisons and roughly $75 billion annually to support higher education.
Solutions?
Temin contends in the book that a renewed focus on education is a principal way to distribute opportunities better throughout society.
"The link between the two parts of the modern dual economy is education, which provides a possible path that children of low-wage workers can take to move into the FTE sector," Temin writes.
That begins with early-childhood education, which Temin calls "critically important" - although, he says, "in order to continue those benefits, [students] have to build on that foundation. That goes all the way up to college."
And for students in challenging social and economic circumstances, Temin adds, what matters is not just the simple acquisition of knowledge but the classroom experiences that lead to, as he puts it, "Knowing how to think, how to get on with people, how to cooperate. All the social skills and social capital [are] going to be critically important for kids in this environment."
In the book Temin bluntly advocates for greater investment in public schools as well as public universities, saying that America's "educational system was the wonder of the 20th century." It still works very well, he notes, for kids at good public schools and for those college students who graduate without burdensome debt.
But for others, he notes, "We don't have a path for the next generation to have what we expect for a middle-class life [and] not everyone wants to finance it."
"The Vanishing Middle Class" comes amid increasing scrutiny of class relations in the U.S., but at a time when the public discussion of the topic is still very much evolving. Gerald Jaynes, a professor in the departments of Economics and African American Studies at Yale University, calls Temin's new book "a significant addition to the existing literature on inequality."
Temin, for his part, hopes that by the end of "The Vanishing Middle Class," readers will agree that a society paying for more education will have made a worthy investment.
"The people in this country are the resource we have," Temin says. "If we maintain the character of our fellow citizens, that is really our national strength."

Posted by Mark Thoma on Thursday, March 16, 2017 at 12:58 PM in Economics , Income Distribution | Permalink Comments (48) Peter K. : , March 16, 2017 at 01:34 PM

The [neoliberal] Democrats like Sanjait and PGL deliver a two-track economy and wonder why voter turn-out is low and the white working class are susceptible to demagogues like Trump.

Why did Michigan, Wisconsin, Pennsylvania and Ohio go for a laughable reality TV star like Trump.

They expend a lot of energy trying to explain away the obvious like globalization and attacking heretics like Bernie Sanders.

EMichael says it all about race but ignores the obvious.

"Indeed, from about 1945 until 1975, as Temin documents in the book, U.S. productivity gains and the wage gains of goods-producing workers tracked each other closely. But since 1975, productivity has roughly doubled, while those wages have stayed flat."

Interesting that neoliberalism really took off around the 1980s, with Clinton moving the Democrats to the right and endorsing corporate globalization.

Kaleberg -> Peter K.... , March 16, 2017 at 04:17 PM
The unions got their power during the New Deal. They were under serious attack in the 1970s with its inflation and its oil shocks. When the government started insisting that blacks get some of the New Deal goodies, conservative whites balked. When push came to shove, they voted for Reagan who promptly killed the unions. It was a suicide deal. If whites had to share prosperity with blacks, then not being prosperous was better. That attitude is around today.

Neoliberalism was part of it. The Democrats did move to the right. People forget that it was Carter who deregulated the airlines, not Reagan. It was Carter who bought the nonsense about balancing the budget. Hell, it was Carter who started getting tough with the USSR after Nixon's detente.

Mr. Bill -> Mr. Bill... , March 16, 2017 at 07:17 PM
The dual economy, they say, as if it were an abstract.

My Dad was shot in the face in Germany. The Unions were established by the people who established our society.

The sentiments being expressed here by the people whose existence would not even be possible without the efforts of my Dad, and men like him, are breathtaking.

Mr. Bill -> Mr. Bill... , March 16, 2017 at 07:34 PM
Is economics, as a political science, that corrupt ? That it presumes to transcend common decency, and sense ?
Mr. Bill -> Mr. Bill... , March 16, 2017 at 07:39 PM
The current "thinking" and bloviation of main stream Economics, seems to be, that they're wishful thinking, contradicts the accepted, published foundations.
Mr. Bill -> Mr. Bill... , March 16, 2017 at 07:43 PM
And thereby, they should be given a pint, and not be recognized as the charlatans that they are,l nut instead, be honored.

Didn't Shakespeare discuss this very conundrum ?

Mr. Bill -> Mr. Bill... , March 16, 2017 at 08:41 PM
Barrack O'Bama may have been the worst President of all time. Except for George Bush, Bill Clinton, the other Bush, and our favorite life-guard, Ronald Reagan.
Mr. Bill -> Mr. Bill... , March 16, 2017 at 09:16 PM
The United States of America.
MANKIND being originally equals in the order of creation, the equality could only be destroyed by some subsequent circumstance: the distinctions of rich and poor may in a great measure be accounted for, and that without having recourse to the harsh ill-sounding names of oppression and avarice. Oppression is often the CONSEQUENCE, but seldom or never the MEANS of riches; and tho' avarice will preserve a man from being necessitously poor, it generally makes him too timorous to be wealthy.

But there is another and great distinction for which no truly natural or religious reason can be assigned, and that is the distinction of men into KINGS and SUBJECTS. Male and female are the distinctions of nature, good and bad the distinctions of Heaven; but how a race of men came into the world so exalted above the rest, and distinguished like some new species, is worth inquiring into, and whether they are the means of happiness or of misery to mankind.

In the early ages of the world, according to the scripture chronology there were no kings; the consequence of which was, there were no wars; it is the pride of kings which throws mankind into confusion. Holland, without a king hath enjoyed more peace for this last century than any of the monarchical governments in Europe. Antiquity favours the same remark; for the quiet and rural lives of the first Patriarchs have a snappy something in them, which vanishes when we come to the history of Jewish royalty.

Government by kings was first introduced into the world by the Heathens, from whom the children of Israel copied the custom. It was the most prosperous invention the Devil ever set on foot for the promotion of idolatry. The Heathens paid divine honours to their deceased kings, and the Christian World hath improved on the plan by doing the same to their living ones. How impious is the title of sacred Majesty applied to a worm, who in the midst of his splendor is crumbling into dust!

As the exalting one man so greatly above the rest cannot be justified on the equal rights of nature, so neither can it be defended on the authority of scripture; for the will of the Almighty as declared by Gideon, and the prophet Samuel, expressly disapproves of government by Kings.

All anti-monarchical parts of scripture have been very smoothly glossed over in monarchical governments, but they undoubtedly merit the attention of countries which have their governments yet to form. "Render unto Cesar the things which are Cesar's" is the scripture doctrine of courts, yet it is no support of monarchical government, for the Jews at that time were without a king, and in a state of vassalage to the Romans.

Mr. Bill -> Mr. Bill... , March 16, 2017 at 09:29 PM
Thomas Paine

The Pamphlet

http://www.ushistory.org/paine/commonsense/sense3.htm

Peter K. : , March 16, 2017 at 01:39 PM
It's funny how Sanjait and PGL don't want to talk about what Krugman wrote in his latest blog post:

"This ties in with an important recent piece by Zack Beauchamp on the striking degree to which left-wing economics fails, in practice, to counter right-wing populism; basically, Sandersism has failed everywhere it has been tried. Why?

The answer, presumably, is that what we call populism is really in large degree white identity politics, which can't be addressed by promising universal benefits. Among other things, these "populist" voters now live in a media bubble, getting their news from sources that play to their identity-politics desires, which means that even if you offer them a better deal, they won't hear about it or believe it if told. For sure many if not most of those who gained health coverage thanks to Obamacare have no idea that's what happened.

That said, taking the benefits away would probably get their attention, and maybe even open their eyes to the extent to which they are suffering to provide tax cuts to the rich.

In Europe, right-wing parties probably don't face the same dilemma; they're preaching herrenvolk social democracy, a welfare state but only for people who look like you. In America, however, Trumpism is faux populism that appeals to white identity but actually serves plutocrats. That fundamental contradiction is now out in the open."

https://krugman.blogs.nytimes.com/2017/03/14/populism-and-the-politics-of-health/

The 1950, 1960 and 1970s saw the civil rights movement, anti-war movement and feminist movements.

Economics helps with white and male supremacy.

But the EMichaels, Sanjaits, PGLs, Democrats, Krugmans want to make either/or.

Peter K. -> Peter K.... , March 16, 2017 at 01:40 PM
And the rise of the environmental movement!

And Krugman is against all of that? WTF!

RGC : , March 16, 2017 at 01:59 PM
The division isn't between 2 groups of middle class.

The division to worry about is between the 99% and the 1%.

More BS and diversion from mainstream economists.

Deindustrialization never mentioned by economists - Youngstown was created by free trade policies : , March 16, 2017 at 03:42 PM
Economists never mention massive deindustrialization as a reason for our country's transformation into a Lewis-modeled developing country.
pgl : , March 16, 2017 at 04:35 PM
Peter Temin's CV:

http://economics.mit.edu/faculty/ptemin/cv

He is now 79 years old. He has written some brilliant analyzes over his incredible career. His latest is something I must read as this discussion is so spot on regarding the current debate.

[Mar 10, 2017] Michael Hudson: Retirement? What Social Obligation?

Notable quotes:
"... This was Alan Greenspan's trick that he pulled in the 1980s as head of the Greenspan Commission. He said that what was needed in America was to traumatize the workers – to squeeze them so much that they won't have the courage to strike. Not have the courage to ask for better working conditions. He recognized that the best way to really squeeze wage earners is to sharply increase their taxes. He didn't call FICA wage withholding a tax, but of course it is. His trick was to say that it's not really a tax, but a contribution to Social Security. And now it siphons off 15.4% of everybody's pay check, right off the top. ..."
"... The effect of what Greenspan did was more than just to make wage earners pay this FICA rake-off out of their paycheck every month. The charge was set so high that the Social Security fund lent its surplus to the government. Now, with all this huge surplus that we're squeezing out of the wage earners, there's a cut-off point: around $120,000. The richest people don't have to pay for Social Security funding, only the wage-earner class has to. Their forced savings are lent to the government to enable it to claim that it has so much extra money in the budget pouring in from social security that now it can afford to cut taxes on the rich. ..."
"... So the sharp increase in Social Security tax for wage earners went hand-in-hand with sharp reductions in taxes on real estate, finance for the top One Percent – the people who live on economic rent, not by working, not by producing goods and services but by making money on their real estate, stocks and bonds "in their sleep." That's how the five percent have basically been able to make their money. ..."
"... The Federal Reserve has just published statistics saying the average American family, 55 and 60 years old, only has about $14,000 worth of savings. This isn't nearly enough to retire on. There's also been a vast looting of pension funds, largely by Wall Street. That's why the investment banks have had to pay tens of billions of dollars of penalties for cheating pension funds and other investors. The current risk-free rate of return is 0.1% on government bonds, so the pension funds don't have enough money to pay pensions at the rate that their junk economics advisors forecast. The money that people thought was going to be available for their retirement, all of a sudden isn't. The pretense is that nobody could have forecast this! ..."
"... In Chile, the Chicago Boys really developed this strategy. University of Chicago economists made it possible, by privatizing and corporatizing the Social Security system. Their ploy was to set aside a pension fund managed by the company, mostly to invest in its own stock. The company would then set up an affiliate that would actually own the company under an umbrella, and then leave the company with its pension fund to go bankrupt – having already emptied out the pension fund by loaning it to the corporate shell. ..."
"... We have the highest healthcare costs in the world, so out of your paycheck – which is not increasing – you're going to have to pay more and more for FICA withholding for Social Security, more and more for healthcare, for the pharmaceutical monopoly and the health insurance monopoly. You'll also have to pay more and more to use public services for transportation to get to work, because the state is not funding that anymore. We're cutting taxes on the rich, so we don't have the money to do what social democracies are supposed to do. You're going to privatize the roads, so that now you're going to have to pay to use the road to drive to work, if you don't have public transportation. ..."
"... "Classical and neo-classical economics, as dominant today, has used the deductive methodology: Untested axioms and unrealistic assumptions are the basis for the formulation of theoretical dream worlds that are used to present particular 'results'. As discussed in Werner (2005), this methodology is particularly suited to deriving and justifying preconceived ideas and conclusions, through a process of working backwards from the desired 'conclusions', to establish the kind of model that can deliver them, and then formulating the kind of framework that could justify this model by choosing suitable assumptions and 'axioms'. In other words, the deductive methodology is uniquely suited for manipulation by being based on axioms and assumptions that can be picked at will in order to obtain pre-determined desired outcomes and justify favoured policy recommendations. It can be said that the deductive methodology is useful for producing arguments that may give a scientific appearance, but are merely presenting a pre-determined opinion." ..."
"... "Progress in economics and finance research would require researchers to build on the correct insights derived by economists at least since the 19th century (such as Macleod, 1856). The overview of the literature on how banks function, in this paper and in Werner (2014b), has revealed that economics and finance as research disciplines have on this topic failed to progress in the 20th century. The movement from the accurate credit creation theory to the misleading, inconsistent and incorrect fractional reserve theory to today's dominant, yet wholly implausible and blatantly wrong financial intermediation theory indicates that economists and finance researchers have not progressed, but instead regressed throughout the past century. That was already Schumpeter's (1954) assessment, and things have since further moved away from the credit creation theory." ..."
"... "Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system." ..."
"... it insults the intelligence of the audience, ..."
"... we would now call ..."
"... totally insupportable on its face. ..."
"... as a corporate, spiritually mandated obligation, ..."
"... You're going to privatize the roads, so that now you're going to have to pay to use the road to drive to work, if you don't have public transportation. ..."
"... Henry Ford II: Walter, how are you going to get those robots to pay your union dues? Walter Reuther: Henry, how are you going to get them to buy your cars? ..."
"... "You're turning the economy into what used to be called feudalism. Except that we don't have outright serfdom, because people can live wherever they want. But they all have to pay to this new hereditary 'financial/real estate/public enterprise' class that is transforming the economy." ..."
"... "The industrial capitalists, these new potentates, had on their part not only to displace the guild masters of handicrafts, but also the feudal lords, the possessors of the sources of wealth. In this respect, their conquest of social power appears as the fruit of a victorious struggle both against feudal lordship and its revolting prerogatives, and against the guilds and the fetters they laid on the free development of production and the free exploitation of man by man. The chevaliers d'industrie, however, only succeeded in supplanting the chevaliers of the sword by making use of events of which they themselves were wholly innocent. They have risen by means as vile as those by which the Roman freedman once on a time made himself the master of his patronus. ..."
"... The starting point of the development that gave rise to the wage labourer as well as to the capitalist, was the servitude of the labourer. The advance consisted in a change of form of this servitude, in the transformation of feudal exploitation into capitalist exploitation. " ..."
Mar 10, 2017 | www.nakedcapitalism.com
Posted on March 9, 2017 by Yves Smith Yves here. This Real News Network interview is from a multi-part series about Michael Hudson's new book, J is for Junk Economics. And after a lively discussion by readers of the economic necessity of many to become expats to get their living costs down to a viable level, a discussion of the disingenuous political messaging around retirement seemed likely. Among the people in my age cohort, the ones that managed to attach themselves to capital (being in finance long enough at a senior enough level, working in Corporate America and stock or stock options) are generally set to have an adequate to very comfortable retirement. The ones who didn't (and these include people I know who are very well paid professionals but for various reasons, like health problems or periods of unemployment that drained savings, haven't put much away) will either have to continue working well past a normal retirement age (even charitably assuming they can find adequately compensated work) or face a struggle or even poverty.

https://www.youtube.com/embed/cdv9EvWxkdc

SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries, coming to you from Baltimore. I'm speaking with Michael Hudson about his new book J Is For Junk Economics: A Guide to Reality in the Age of Deception.

Thanks for joining me again, Michael.

MICHAEL HUDSON: Good to be here.

SHARMINI PERIES: So, Michael, on page 260 of your book you deal with the issue of Social Security and it's a myth that Social Security should be pre-funded by its beneficiaries, or that progressive taxes should be abolished in favor of a flat tax. Just one tax rate for everyone you criticize. We talked about this earlier, but let's apply what this actually means when it comes to Social Security.

MICHAEL HUDSON: The mythology aims to convince people that if they're the beneficiaries of Social Security, they should be responsible for saving up to pre-fund it. That's like saying that you're the beneficiary of public education, so you have to pay for the schooling. You're the beneficiary of healthcare, you have to save up to pay for that. You're the beneficiary of America's military spending that keeps us from being invaded next week by Russia, you have to spend for all that – in advance, and lend the money to the government for when it's needed.

Where do you draw the line? Nobody anticipated in the 19th century that people would have to pay for their own retirement. That was viewed as an obligation of society. You had the first public pension (social security) program in Germany under Bismarck. The whole idea is that this is a public obligation. There are certain rights of citizens, and among these rights is that after your working life you deserve to live in retirement. That means that you have to be able to afford this retirement, and not have to beg in the street for money. The wool that's been pulled over people's eyes is to imagine that because they're the beneficiaries of Social Security, they have to actually pay for it.

This was Alan Greenspan's trick that he pulled in the 1980s as head of the Greenspan Commission. He said that what was needed in America was to traumatize the workers – to squeeze them so much that they won't have the courage to strike. Not have the courage to ask for better working conditions. He recognized that the best way to really squeeze wage earners is to sharply increase their taxes. He didn't call FICA wage withholding a tax, but of course it is. His trick was to say that it's not really a tax, but a contribution to Social Security. And now it siphons off 15.4% of everybody's pay check, right off the top.

The effect of what Greenspan did was more than just to make wage earners pay this FICA rake-off out of their paycheck every month. The charge was set so high that the Social Security fund lent its surplus to the government. Now, with all this huge surplus that we're squeezing out of the wage earners, there's a cut-off point: around $120,000. The richest people don't have to pay for Social Security funding, only the wage-earner class has to. Their forced savings are lent to the government to enable it to claim that it has so much extra money in the budget pouring in from social security that now it can afford to cut taxes on the rich.

So the sharp increase in Social Security tax for wage earners went hand-in-hand with sharp reductions in taxes on real estate, finance for the top One Percent – the people who live on economic rent, not by working, not by producing goods and services but by making money on their real estate, stocks and bonds "in their sleep." That's how the five percent have basically been able to make their money.

The idea that Social Security has to be funded by its beneficiaries has been a setup for the wealthy to claim that the government budget doesn't have enough money to keep paying. Social Security may begin to run a budget deficit. After having run a surplus since 1933, for 70 years, now we have to begin paying some of this savings out. That's called a deficit, as if it's a disaster and we have to begin cutting back Social Security. The implication is that wage earners will have to starve in the street after they retire.

The Federal Reserve has just published statistics saying the average American family, 55 and 60 years old, only has about $14,000 worth of savings. This isn't nearly enough to retire on. There's also been a vast looting of pension funds, largely by Wall Street. That's why the investment banks have had to pay tens of billions of dollars of penalties for cheating pension funds and other investors. The current risk-free rate of return is 0.1% on government bonds, so the pension funds don't have enough money to pay pensions at the rate that their junk economics advisors forecast. The money that people thought was going to be available for their retirement, all of a sudden isn't. The pretense is that nobody could have forecast this!

There are so many corporate pension funds that are going bankrupt that the Pension Benefit Guarantee Corporation doesn't have enough money to bail them out. The PBGC is in deficit. If you're going to be a corporate raider, if you're going to be a Governor Romney or whatever and you take over a company, you do what Sam Zell did with the Chicago Tribune: You loot the pension fund, you empty it out to pay the bondholders that have lent you the money to buy out the company. You then tell the workers, "I'm sorry there is nothing there. It's wiped out." Half of the employee stock ownership programs go bankrupt. That was already a critique made in the 1950s and '60s.

In Chile, the Chicago Boys really developed this strategy. University of Chicago economists made it possible, by privatizing and corporatizing the Social Security system. Their ploy was to set aside a pension fund managed by the company, mostly to invest in its own stock. The company would then set up an affiliate that would actually own the company under an umbrella, and then leave the company with its pension fund to go bankrupt – having already emptied out the pension fund by loaning it to the corporate shell.

So it's become a shell game. There's really no Social Security problem. Of course the government has enough tax revenue to pay Social Security. That's what the tax system is all about. Just look at our military spending. But if you do what Donald Trump does, and say that you're not going to tax the rich; and if you do what Alan Greenspan did and not make higher-income individuals contribute to the Social Security system, then of course it's going to show a deficit. It's supposed to show a deficit when more people retire. It was always intended to show a deficit. But now that the government actually isn't using Social Security surpluses to pretend that it can afford to cut taxes on the rich, they're baiting and switching. This is basically part of the shell game. Explaining its myth is partly what I try to do in my book.

SHARMINI PERIES: If the rich people don't have to contribute to the Social Security base, are they able to draw on it?

MICHAEL HUDSON: They will draw Social Security up to the given wage that they didn't pay Social Security on, which is up to $120,000 these days. So yes, they will get that little bit. But what people make over $120,000 is completely exempt from the Social Security system. These are the rich people who run corporations and give themselves golden parachutes.

Even for companies that have engaged in massive financial fraud, the large banks, City Bank, Wells Fargo – all these have golden parachutes. They still are getting enormous pensions for the rest of their lives. And they're talking as if, well, corporate pensions are in deficit, but for the leading officers, arrangements are quite different from the pensions to the blue collar workers and the wage earners as a whole. So there's a whole array of fictitious economic statistics.

I describe this in my dictionary as "mathiness." The idea that if you can put a number on something, it somehow is scientific. But the number really is the product of corporate accountants and lobbyists reclassifying income in a way that it doesn't appear to be taxable income.

Taking money out and giving it to the richest 5%, while making it appear as if all this deficit is the problem of the 95%, is "blame the victim" economics. You could say that's the way the economic accounts are being presented by Congress to the American people. The aim is to popularize a "blame the victim" economics. As if it's your fault that Social Security's going bankrupt. This is a mythology saying that we should not treat retirement as a public obligation. It's becoming the same as treating healthcare as not being a public obligation.

We have the highest healthcare costs in the world, so out of your paycheck – which is not increasing – you're going to have to pay more and more for FICA withholding for Social Security, more and more for healthcare, for the pharmaceutical monopoly and the health insurance monopoly. You'll also have to pay more and more to use public services for transportation to get to work, because the state is not funding that anymore. We're cutting taxes on the rich, so we don't have the money to do what social democracies are supposed to do. You're going to privatize the roads, so that now you're going to have to pay to use the road to drive to work, if you don't have public transportation.

You're turning the economy into what used to be called feudalism. Except that we don't have outright serfdom, because people can live wherever they want. But they all have to pay to this new hereditary "financial/real estate/public enterprise" class that is transforming the economy.

SHARMINI PERIES All right, Michael. Many, many, many things to learn from your great book, J Is For Junk Economics: A Guide to Reality in the Age of Deception. Michael is actually on the road promoting the book. So if you have an opportunity to see him at one of the places he's going to be speaking, you should check out his website, michael-hudson.com

So I thank you so much for joining us today, Michael. And as most of you know, Michael Hudson is a regular guest on The Real News Network. We'll be unpacking his book and some of the concepts in it on an ongoing basis. So please stay tuned for those interviews.

Thank you so much for joining us today, Michael.

craazyman , March 9, 2017 at 10:10 am

It's 10 bagger time for sure. A house in the tropics with servants at your beck and call. Breakfast on the veranda. Lunch at the club. An afternoon sail. Dinner at the house of a famous author. Or some native woman who cooks spicy food and is hotter than the sun. No shuffleboard and pills! You need to stay buff if you wanna live like this. You can't be flabby and short of breath.

j84ustin , March 9, 2017 at 10:21 am

Thanks for this.

flora , March 9, 2017 at 11:47 am

+1. Yes. Great post. Very clear explanation of Greenspan's SocSec bait-and-switch.

PhilM , March 9, 2017 at 10:32 am

Yves's remark on retirement by sector is apt. I laugh bitter tears when I see that a financial CEO contract always includes a "pension," as if the tens of millions of dollars in salary and bonuses weren't enough.

A "pension" is for those who, broken by a life of hard physical labor, finally can't work any more for their crust of bread. It's not another revenue line-item that's barely enough to refuel the yacht.

There was a time when people "saved for retirement." With real rates of return being negative, and all assets priced arbitrarily at the whim of the central bank's policy du jour, I am perfectly frank when people ask "what should they invest in": nothing. Pay down your debt, and spend whatever you have beyond an emergency cushion right now, while you can enjoy it. Savings will inevitably be wasted, by inflation, the "health-care system," or financial-sector scammers. Do not ask for whom the bell tolls; if you have to ask, you can't afford it.

This is all in the context of the Federal Government already spending 20% of GDP, a number that was never designed to happen. It is the States that were supposed to be in charge of the people's welfare, not the national authority. So the argument that we should increase Federal taxes to somehow redistribute wealth is also wrong, because that wealth will simply be wasted, spent by people who are responsible to no one.

At moments like this there are no good choices. Most Europeans have long learned to live with governments that were hostile to them, and that is where we stand now.

Tocqueville's Democracy In America is tough going in spots, but my gosh, what a beautiful world he depicts, when the average Pennsylvanian's tax liability beyond his township was $4 a year.

a different chris , March 9, 2017 at 12:56 pm

I won't argue too hard about your "Federal vs State" argument, but note that if the state is in charge of most taxation then Richy Rich can live in a low tax state next door and employ the well-educated, healthy (single-payer) people in your state.

Sound of the Suburbs , March 9, 2017 at 10:38 am

Just got my copy of "J is for Junk Economics"

Other people are on the same wavelength.

Professor Werner moving from reality to fantasy:

"Classical and neo-classical economics, as dominant today, has used the deductive methodology: Untested axioms and unrealistic assumptions are the basis for the formulation of theoretical dream worlds that are used to present particular 'results'. As discussed in Werner (2005), this methodology is particularly suited to deriving and justifying preconceived ideas and conclusions, through a process of working backwards from the desired 'conclusions', to establish the kind of model that can deliver them, and then formulating the kind of framework that could justify this model by choosing suitable assumptions and 'axioms'. In other words, the deductive methodology is uniquely suited for manipulation by being based on axioms and assumptions that can be picked at will in order to obtain pre-determined desired outcomes and justify favoured policy recommendations. It can be said that the deductive methodology is useful for producing arguments that may give a scientific appearance, but are merely presenting a pre-determined opinion."

"Progress in economics and finance research would require researchers to build on the correct insights derived by economists at least since the 19th century (such as Macleod, 1856). The overview of the literature on how banks function, in this paper and in Werner (2014b), has revealed that economics and finance as research disciplines have on this topic failed to progress in the 20th century. The movement from the accurate credit creation theory to the misleading, inconsistent and incorrect fractional reserve theory to today's dominant, yet wholly implausible and blatantly wrong financial intermediation theory indicates that economists and finance researchers have not progressed, but instead regressed throughout the past century. That was already Schumpeter's (1954) assessment, and things have since further moved away from the credit creation theory."

"A lost century in economics: Three theories of banking and the conclusive evidence" Richard A. Werner

http://www.sciencedirect.com/science/article/pii/S1057521915001477

Even the BoE has quietly come clean about money.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Leaving Paul Krugman looking rather foolish

" banks make their profits by taking in deposits and lending the funds out at a higher rate of interest" Paul Krugman, 2015.

No, it doesn't work like that Paul.

Sound of the Suburbs , March 9, 2017 at 10:46 am

The facts tell all.

Francis Fukuyama talked of the "end of history" and "liberal democracy" in 1989.

Capitalism had conquered all and was the one remaining system left that had stood the test of time.

With such a successful track record, everything was being changed to a new neo-liberal ideology and globalization was used to test this new ideology everywhere.

The Great Moderation seemed to indicate that the new ideology was a great success.

"Seemed" is the operative word here.

A "black swan" arrives in 2008 and nothing is the same again, the Central Bankers pump in trillions to maintain the new normal of secular stagnation.

Sovereign debt crises erupt, the Euro-zone starts to disintegrate, austerity becomes the norm., no one knows how to restore growth and the populists rise.

A new ideology comes in that is rolled out globally and seems to work before 2008.

What happened in 2008?

This is the build up to 2008 that can be seen in the money supply (money = debt):

http://www.whichwayhome.com/skin/frontend/default/wwgcomcatalogarticles/images/articles/whichwayhomes/US-money-supply.jpg

Everything is reflected in the money supply.

The money supply is flat in the recession of the early 1990s.

Then it really starts to take off as the dot.com boom gets going which rapidly morphs into the US housing boom, courtesy of Alan Greenspan's loose monetary policy.

When M3 gets closer to the vertical, the black swan is coming and you have an out of control credit bubble on your hands (money = debt).

The theory.

Irving Fisher produced the theory of debt deflation in the 1930s.

Hyman Minsky carried on with his work and came up with the "Financial instability Hypothesis" in 1974.
Steve Keen carried on with their work and spotted 2008 coming in 2005.

You can see what Steve Keen saw in the graph above, it's impossible to miss when you know what you are looking for but no one in the mainstream did.

The hidden secret of money.

Money = Debt

From the BoE:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

If you paid off all the debt there would be no money.

Money and debt are opposite side of the same coin, matter and anti-matter.

The money supply reflects debt/credit bubbles.

Monetary theory has been regressing for over 100 years to today's abysmal theory where banks act as intermediaries and don't create and destroy money.

The success of earlier years was mainly due to money creation from new debt (mainly in housing booms) globally feeding into economies leaving a terrible debt over-hang.

Jam today, penury tomorrow.

This is how debt works.

Twelve people were officially recognised by Bezemer in 2009 as having seen 2008 coming, announcing it publicly beforehand and having good reasoning behind their predictions (Michael Hudson and Steve Keen are on the list of 12).

They all saw the problem being excessive debt with debt being used to inflate asset prices (US housing).

The Euro's periphery nations had unbelievably low interest rates with the Euro, the risks were now based on common debt service. Mass borrowing and spending occurs at the periphery with the associated money creation causing positive feedback.

Years later, it was found the common debt service didn't actually exist and interest rates correct for the new reality.

Jam today, penury tomorrow.

Why doesn't austerity work? (although it has been used nearly everywhere)

You need to understand money, debt, money creation and destruction on bank balance sheets and its effect on the money supply. Almost no one does.

Richard Koo does:

https://www.youtube.com/watch?v=8YTyJzmiHGk

Ben Bernanke read Richard Koo's book and stopped the US going over the fiscal cliff by cutting government spending.

Sound of the Suburbs , March 9, 2017 at 11:20 am

Alternative and I would say much more accurate realities:

1) Michael Hudson "Killing the Host", "J is for Junk Economics"

The knowledge of economic history and the classical economists that has been lost and the problems this is causing. Ancient Sumer had more enlightened views on debt than we have today.

2) Steve Keen "De-bunking Economics"

His work is based on that of Hyman Minsky and looks into the effects of private debt on the economy and the inflation of asset bubbles with debt.

3) Richard Werner "Where does money come from?"

The only book generally available that tells the truth about money, I don't think there are any other modern books that do and certainly not in economics textbooks

4) Richard Koo's study on the Great Depression and Japan after 1989 showing the only way out of debt deflation/balance sheet recessions.

https://www.youtube.com/watch?v=8YTyJzmiHGk

Sound of the Suburbs , March 9, 2017 at 11:55 am

The BoE:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The BoE have made a mistake.

"Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system."

The limit for money creation holds true when banks keep the debt they issue on their own books.

The BoE's statement was true, but is not true now as banks can securitize bad loans and get them off their books.

Before 2008, banks were securitising all the garbage sub-prime mortgages, e.g. NINJA mortgages, and getting them off their books.

Money is being created freely and without limit, M3 is going exponential before 2008.

Dead Dog , March 9, 2017 at 1:02 pm

Thanks SOS, agree. We're at that 08 point now, in fact it's worse.

Pensions should just be a click of the computer, no borrowings, savings or taxes needed and they need to be sufficient to live on.

No, we aren't 'winning'

In Australia, we used to give people the 'aged' at 60 for women and 65 for men. Now its 67 for both, the woman's aged cut in was raised for 'equality' reasons, and it going up to 70 for my kids.

Politicians, judges, CEOs and the c-class, all those 'shiny bums', they can often work well into their 60s. The rest of us experience age discrimination in a tight job market and are forced into menial jobs just when society should be funding their well earned retirement.

diogenes , March 9, 2017 at 10:41 am

The whole "there aren't enough workers to support retirees" meme is risible.

Example: Jane funds an IRA for 30 years. For those 30 years, there is one person paying in, and zero taking out. When Jane retires, the IRA flips to one person taking out, and zero paying in.

Disaster, or working as advertised?

That Serious Thinkers, elected officials and the SSA themselves advance this trope to explain why SS is hopeless is proof of willful mendacity.

Now if these folks admit, well yuh, you paid in over all of these years, but the money ain't there no more, then first, that's an admission of mismanagement (unsurprising), and second, bail us the fuck out like you did Wall Street.

inhibi , March 9, 2017 at 11:48 am

Most every purported "help" by the government is the exact opposite: your paying into a black hole.

Look around you. What around you was paid for by the government? The answer is none of it was. Taxes are a way to keep the bureaucratic structure afloat. What is very clear is that once government reaches a certain size it begins to massively leach off of those that work and gives it to those that "manage".

Look at any industry today and you will find, in the private sector, declining or stagnant wages for the "drones". Then look at the public sector: expanding, better benefits, better wages, less work etc. Thinking about it makes my blood boil. I see truckers making less now then 10 years ago, yet, the industry keeps crying that they "don't have enough workers". Yeah, sorry no one wants to work 25/8 driving around in the day time, sleeping in a truck at night, getting tracked through GPS & get penalized for going above speed limits when they can work for the DMV, make the same amount, and sit at a desk for 7 hours a day with plenty of benefits and vacation time.

Its about time for this system to implode. I see globalization and government expansion as a huge force that will eventually cause a revolution in the States.

Art Eclectic , March 9, 2017 at 12:12 pm

Globalization and the government are simply red herrings meant to distract Trump voters while shareholder value driven corporate overlords continue looting.

a different chris , March 9, 2017 at 1:09 pm

Look around you . The government employs less people than pretty much for my whole life. Please get informed before you go off on a multi-paragraph rant.

http://historyinpieces.com/research/federal-personnel-numbers-1962

If you want a job join the military. Do you think that's a good option?

jrs , March 9, 2017 at 7:01 pm

maybe noone should work in trucking, freight trains are much more energy efficient as far as a means of transporting goods over long distances. Nah I'm not faulting truckers, just saying it makes no societal sense is all except maybe for the last few miles, but then neither do a lot of things. I doubt many people want to work at the DMV, but then maybe the benefits are enough to make a distasteful job seem worth it.

Arizona Slim , March 9, 2017 at 12:37 pm

ISTR reading that the creators of the 401k saying that they never intended it to be a replacement for a pension.

PhilM , March 9, 2017 at 11:05 am

As usual, the abuse of history is the outstanding credibility-buster in this piece. When an author says this,

Nobody anticipated in the 19th century that people would have to pay for their own retirement. That was viewed as an obligation of society.

why should I believe anything else that he has to say?

The sole instance given is of Bismarck's Germany, actually ground-breaking in its social welfare policies, which came only in the last part of the 19th century.

For most of the 19th century, just about everywhere, nobody who worked for a living expected to live long enough to retire.

Indeed, retirement in past centuries had a different denotation. Its common use was among the aristocracy, when one of that number determined to remove himself from active (urban) social or political life and withdraw (hence the etymology, "re-tirer"), usually to the country.

Haygood had to resuscitate "rusticate" for the other day, to achieve a modern equivalent of that.

All of this is common knowledge. In case you don't think so, spend five minutes with any book of demographics or social history; and that's just for Europe. Don't let's even ask what "nobody expected to pay for their retirement" meant in early nineteenth-century Alabama.

By the way, Hudson does this all the time. When I can fact-check offhand, from my fund of common knowledge, he is often casually abusing the truth. I can be pretty sure that the rest of what he says is just as unreliable.

Arizona Slim , March 9, 2017 at 12:39 pm

Didn't Bismarck create those social welfare programs in order to prevent unrest in a recently unified Germany?

MBC , March 9, 2017 at 12:52 pm

You may be correct about the 19th century, but it is 2017. And his points about the US tax system, the banks, the wealthiest 1% and our gov't deceiving the middle and lower class are solid. A very basic retirement and healthcare should be provided to all in any decent marginally successful society. Not to mention a supposedly "great" one.

Rick Zhang , March 9, 2017 at 7:21 pm

I think this is where some progressive get tripped up and don't understand why their policies aren't more popular to the wide swaths of America outside of their bubble.

Often times, these people (I use this term loosely to include working class whites in Appalachia as well as Silicon Valley libertarians) like to provide a fair and wide safety net. However, most policies that are advanced are strictly means tested. This causes significant resentment among those just outside of the cutoff lines. Think: Social Security has essentially blanket coverage. Yes, there's some redistribution going on behind the scenes, but if I pay in for 30 years I will get most of my money back. It's wildly popular, while welfare programs are not.

The same applies for health care – Medicare is popular and Medicaid is not. If I pay in for a government program, I want to be able to take advantage of it. Save me the crap about not wanting to subsidize the lifestyles of the 1%; they pay in far more than they would take out of the program. It's a small price to pay to have universal coverage and buy in from all segments of society. So extending Medicare down to everyone is a better political strategy than extending Medicaid upwards to encompass higher income levels.

More reading: https://www.nytimes.com/2017/03/07/business/economy/trump-budget-entitlements-working-class.html

Rick Zhang @ Millennial Lifehacker

Hans Suter , March 9, 2017 at 12:57 pm

why don't try to educate yourself, you may start here https://eh.net/encyclopedia/economic-history-of-retirement-in-the-united-states/

a different chris , March 9, 2017 at 1:12 pm

You read a great deal into a statement that you didn't at all prove was untrue. Not impressive.

The question is, did society believe that it had a responsibility of care for people that got too old to work? You didn't even address that. Yes we know life was "nasty, brutish and (most often) short. That doesn't invalidate what he said.

Dead Dog , March 9, 2017 at 1:13 pm

PhilM 'I can be pretty sure that the rest of what he says is just as unreliable.'

No mate, he speaks truth and may have exaggerated, but the point remains that here, the UK, most of Europe – then the state funds your pension if you need one. It is now a social obligation. Only in the US, do you have this class of people (the working class) who don't deserve retirement and must fund their own meagre pensions, and if the 'pool which funds the pensions' becomes insufficient, well you know the rest.

Taxes see, they fund things, or more often don't, because it's a widely accepted lie to keep the private bank money creation bullshit going forever.

PhilM , March 9, 2017 at 1:41 pm

That's the problem, Dog, I generally agree with his point, and with the responders to my comment, on policy grounds. My point is that leading with something that is provably false, and even probably false to common knowledge, is not a winning tactic; some would say it insults the intelligence of the audience, even.

To me this site, if it's about anything, is about filtering out the BS that is used by people with an agenda to "enhance" their arguments. Lambert does this with a Lancelot-sized skewer. And part of the beauty is the crowd-sourced fact-checking from an extraordinarily informed, and sceptical, community.

I may not have much to add to their expertise, but one thing I do know is some European history, and it drives me berzerk to see people just misuse history as if it strengthens their argument. If they don't know that what they are saying is true, they should not say it. And by "know it is true," I mean, know the source, and the source of the source, and be able to judge its reliability. That is what scholarship is all about: seeing how far down the turtles go.

So when someone just tosses out an assertion about "what the past thought was right," as if that created a moral obligation or not in 2017 (which as MBC quite rightly observed it does not, at least not without a clearer argument), they should be critiqued. When their assertion is based on sloppy cherry-picked facts and wrongly generalized, they should be called out as either uninformed or malicious, in hopes they will be less so in the future.

That's all I was saying; I did not have a point to make about pensions, because I agree with Hudson's viewpoints almost all the time, which is why it is so sad to see him turn out to be so cheesy, so often.

My personal experience of pensions is this: they are a total scam to lock people into exploitive, nearly intolerable working conditions on the flimsiest of promises in the private sector; and in the public sector, they are a way of adding to the debt burden of generations yet to come without the assent of the people: taxation without representation, in effect.

I have seen professionals crumble morally thanks to the force of the pension. It is despicable corporate oppression at the subtle level, because it looks as if they are doing a good thing, which of course they are not. It's more subtle than their obvious screaming cruelties to people and animals and the land, which, it must also be said, nobody does anything about either.

Dead Dog , March 9, 2017 at 2:37 pm

Thanks for replying Phil. Good points.

Yes pension systems aren't perfect, but some people don't have family or money to fall back on when they get old. I am seeing more and more of my own friends in their 60s struggling to earn money through work. They want to stop, but can't afford to.

And, I am dismayed and disheartened of seeing people on the sidewalks that could be my parents. Or, shit, me

Rick Zhang , March 9, 2017 at 7:25 pm

I have no sympathy for these people. Read Hillbilly Elegy and see the perspective from the white working class. More often than not, people who are "struggling" in mid life are those who made bad choices. They abused drugs, had kids out of wedlock, or didn't make a career for themselves. Often, they spend poorly – on luxury items and consuming excessively.

I live now just like how I did when I was a poor student – with a carefully limited budget and spending within my means (more on experiences than products). I save 80% of my income and plan to retire early. More people can do the same.

My mentor/hero bought a fixer upper house that she repaired by herself. She bikes to work every day in the snow, and buys her clothes from thrift stores. She makes a six figure salary.

Save for an uncertain future, folks, and you won't find yourself in dire straits later on in life.

– Rick Zhang @ Millennial Lifehacker

Moneta , March 9, 2017 at 7:52 pm

If everyone saved like you did, the economy would be smaller so there would be even more unemployment and no money for savings

Rick Zhang , March 9, 2017 at 8:26 pm

Tragedy of the commons, eh?

If everyone saved more, we'd reach a happier and more balanced equilibrium. Plus, money that's saved is recycled into the economy through lending.

Or maybe you're arguing that the poor should save more and the wealthy should consume more and keep the economy humming.

– Rick Zhang @ Millennial Lifehacker

Jagger , March 9, 2017 at 1:18 pm

For most of the 19th century, just about everywhere, nobody who worked for a living expected to live long enough to retire.

I suspect your children or your extended family, were your retirement if you lived long enough pre-20th century times. Also I cannot imagine there was any sort of defined retirement prior to 20th century for the masses. People simply did whatever they could within their families until they couldn't. Work loads probably just decreased with the fragility of old age.

Also many people did live long lives. IIRC, heavy mortality was primarily concentrated in children and childbirth and maybe the occasional mass epidemic or bloody war. Dodge those and you could probably live a fairly long life.

PhilM , March 9, 2017 at 3:38 pm

Quite right; there was a bimodal or multimodal curve, which is why mean averages of life expectancy are not all that enlightening. But the fact is that most people who worked or fought, worked or fought their whole lives, until they were incapacitated; then there was their family, or the Church, or the poorhouse, or starvation, usually leading to mortal illness, if it had not done so before then.

The other side of that story is that the old folk were there as part of the social and economic unit: helping to pick the harvest with the very youngest; sharing skills and knowledge across four or five generations, century after century-rather than being shuffled off to die in some wretched cubby, doing "retirement" things. There's a terrific little book, Peter Laslett's The World We Have Lost, that gives a well-sourced and interesting picture of pre-industrial family life that pushes people to overcome some of their self-satisfaction about this kind of thing.

watermelonpunch , March 9, 2017 at 5:39 pm

I remember reading where they found a Neanderthal remains that showed that this guy was definitely disabled to the point where he couldn't have survived alone. Which means someone else helped him live longer.
That's what humans have always done pretty much, before money. People paid in by being part of society, and then their community helped them later. Social insurance is just the money big civilization version of it isn't it?

I'm just thinking of the people with aging parents and children with parent cosigned student loans And what if they were responsible for paying the $90,000+ / year nursing home payment and all the medical bills, instead of Social Security, Medicare, Medicaid On top of trying to help their kids get through college.

The whole scenario is a bad joke and getting worse.

Moneta , March 9, 2017 at 1:19 pm

There wasn't 15-20% of the population expecting to live 30 years in retirement and the next generations to pay for their still mortgaged McMansions and trips to the tropics.

I have no issues paying for retirees. I have issues with asking the younger generations to pay for lifestyles that are bigger than theirs. The Western retirement lifestyle is too energy and resource intensive.

jrs , March 9, 2017 at 2:48 pm

I don't think most people collecting a social security check actually have a big lifestyle, much less trips to the tropics, that's a Charles Schwab commercial, not a reality for most people. What Social Security has done is mostly reduce the number of old people living in poverty. Ok so young and middle age people are still living in poverty, making everyone live in poverty including people that are old and frail and sick is not an improvement. Are retired people's lifestyles actually shown to be more energy intensive, I think in many ways they would be less so, ie not making that long commute to the office everyday anymore etc..

polecat , March 9, 2017 at 2:58 pm

This ! Without adequate resources and, most importantly, energy, there are no pensions ! indeed, there is no middle class as well !!

Anonymouse , March 9, 2017 at 4:04 pm

Sorry, but your comment is delusional. It is impossible for someone retired on only Social Security to "pay for their still mortgaged McMansions and trips to the tropics". In what universe is that possible on a MAXIMUM annual income of less than $32,000? Googling "maximum social security benefits" generates the following info:
"The maximum monthly Social Security benefit payment for a person retiring in 2016 at full retirement age is $2,639. However, the maximum allowable benefit amount is only payable to those who had the maximum taxable earnings for at least 35 working years. Depending on when you retire and how much you made while working, your benefits may be considerably less. The estimated average monthly benefit for "all retired workers" in 2016 is $1,341."

jrs , March 9, 2017 at 6:51 pm

I suspect a lot of people (younger than boomers) might be still mortgaged to a small degree when they retire as housing costs have gone up so that people can't afford a mortgage when they are young, so if they buy real estate at all it's at middle age, buy the first home in their 30s or 40s or 50, for a 30 year mortgage. But McMansions have nothing to do with that.

Moneta , March 9, 2017 at 9:01 pm

First of all I did specify that a 15-20% group is doing quite well.

– Debt in retirement is increasing
http://www.investopedia.com/financial-edge/1012/boomers-staying-in-debt-to-retire-in-comfort.aspx

-Average/median square footage house 1973 vs. 2010. https://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

-Social Security represents half of retirement income for half of retirees. https://www.fool.com/investing/general/2016/02/28/how-much-of-my-income-will-social-security-replace.aspx

-Income distribution (see page 9)
https://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf

************

The income distribution table shows that the younger retirees 65-75 are not suffering when compared to the working population they seem to have a good thing going for them

Merging all these data points, it becomes quite apparent that there is a large percentage of retirees who still carry debt while collecting social security.

Increasing social security to some group means making another group pay

PlutoniumKun , March 9, 2017 at 1:59 pm

As usual, the abuse of history is the outstanding credibility-buster in this piece. When an author says this,

Nobody anticipated in the 19th century that people would have to pay for their own retirement. That was viewed as an obligation of society.

why should I believe anything else that he has to say?

The sole instance given is of Bismarck's Germany, actually ground-breaking in its social welfare policies, which came only in the last part of the 19th century.

For most of the 19th century, just about everywhere, nobody who worked for a living expected to live long enough to retire.

Indeed, retirement in past centuries had a different denotation. Its common use was among the aristocracy, when one of that number determined to remove himself from active (urban) social or political life and withdraw (hence the etymology, "re-tirer"), usually to the country.

Historically, he is right and you are entirely wrong, which is not surprising as Michael Hudson is originally a philologist and historian and has specialised in economic history.

The modern conception of retirement is mostly a 20th Century invention, but throughout history, there are many versions of 'retirement', and they were almost always paid out of current expenditures. Roman soldiers were paid lump sums and frequently given land on reaching retirement age through the Aerarium Militare. Militaries throughout ancient and medieval history had similar schemes, and not just for officers, but again, these were rarely if ever paid out of a contribution scheme – it was considered an obligation of the State.

In many, if not most societies, it was accepted that aristocratic employers and governments had obligations to elderly staff – for example, fuedal workers would keep their homes when they were no longer capable of working, and this extended well into the 19th Century. Organised religions would almost always have systems for looking after retired religious members, again, always paid out of current revenues, not some sort of investment fund. The concept of a fixed retirement age (outside of the military) is a relatively modern one, but the concept of 'retirement' is not modern at all.

PhilM , March 9, 2017 at 5:40 pm

This is the worst strawmanning bull**** I have seen in a while; it is simply infuriating. I don't have the time to put all of what follows into perfect order, but here's what I can tap out in a minute or two.

If, PK, you are trying to prove that some people in the past have stopped work and still gotten paid, as part of their lifetime compensation for the work they have done, and that this is, de facto, compensation during what we would now call "retirement," you win. Straw man knocked over.

So let me again quote what Hudson says, just so your argument can be demonstrated as the pointless distraction that it is:

"Nobody anticipated in the 19th century that people would have to pay for their own retirement. That was viewed as an obligation of society."

That couldn't be clearer. "Nobody anticipated," as in "nobody." Meaning it was a generally accepted social value that . what follows. What follows is "people," as in "people"; not just soldiers, or priests, or servants; "people," ie, Gesellschaft; and then, "their own retirement," (which can only imply a period when they were old enough still to do something productive that earned money, but chose not to, instead; because otherwise it would be called "disability," right?). "That was viewed as an obligation of society," meaning, it was a right, not a privilege or gift or compensation, and it was universal, because it applied to "people," and "nobody" thought otherwise.

There is just nothing there that is justifiable in any way based on the history of the nineteenth century. The only exception is Bismarck's Germany, which is adduced as proof of the statement, which is totally insupportable on its face.

If you stand by that, and are trying to suggest that "retirees," meaning as a group everyone in society beyond a pre-defined age, as opposed to the disabled, were ever perceived as having a societally based right to welfare support before the very late nineteenth or early twentieth century, and that only in a very few, very advanced places, you fail three times over.

You do this in classically ahistorical ways: you conflate Gesellschaft with Gemeinschaft; you adduce the military of the ancient world, which is just hilariously anachronistic, but even those prove you wrong when examined closely; you completely misconstrue the rules of the corporately organized ancien regime, which by the way was ancient history as far as the post-Dickensian industrializing Europe that Hudson speaks of; you adduce the military and the priesthood as if they were representatives of "society" as a whole, which they were not–they were adherents of the body that made the rules, and liked to keeps its friends close, and could reward them. The same, while you are at it, was true of some different varieties of public servants–but not many, and again, not before the late nineteenth century, and certainly not in the US:

"Like military pensions, pensions for loyal civil servants date back centuries. Prior to the nineteenth century, however, these pensions were typically handed out on a case-by-case basis; except for the military, there were few if any retirement plans or systems with well-defined rules for qualification, contributions, funding, and so forth. Most European countries maintained some type of formal pension system for their public sector workers by the late nineteenth century. Although a few U.S. municipalities offered plans prior to 1900, most public sector workers were not offered pensions until the first decades of the twentieth century. Teachers, firefighters, and police officers were typically the first non-military workers to receive a retirement plan as part of their compensation."

https://eh.net/encyclopedia/public-sector-pensions-in-the-united-states/

Your ad hominem appeal to Hudson's authority as a historian is amusing: it is actually not surprising that Hudson is wrong, and I am right; because he is an economic historian, with a special faculty, apparently, for conducting contemporary policy polemics; and I would be happy to give you my professional authority, except that this is the internet, so appeals to professional authority don't mean anything at all, but I'll just put it to you that it is more than sufficient; but leaving that aside, I am without a polemical agenda, except just this one: that the past needs to be respected in its totality, and that even when being used to score points in contemporary policy arguments. I know which of us has more credibility here just by reading Hudson's sentences, which are devoid of historical meaning or sensitivity; and I know that I, as a historian, would never knowingly misuse the past to make a point about the present, because that is being a bad, bad doctor.

You bring up three cases: military, clergy, and servants. Those are exactly not what Hudson is talking about when he mentions Bismarck, or the nineteenth century, or retirement and its old age provisions as a whole, so you basically proved my point just by failing to address the actual argument. What Hudson is referring to-because he says so with his one example-is the Bismarckian "Gesellschaft" obligation to what had in previous centuries been called the the third estate in generic terms. Not, mind you, the first and second estates and their servants and adherents. If Hudson were talking about pensions for the military, he would have said so, and his argument would have ended there, in a paragraph, because they are fully protected in that regard and have been, at least more than the average citizen, since the GI Bill. Pensions for the military is not part of some kind of "social obligation" for retirees; it is a reward for long service, and therefore not some kind of "right of social welfare," but a kind of compensation, and it was not much, at that, in the 19th century.

The regular clergy, which made up most of the clergy until the dissolutions, did not retire: their jobs were for life, because they lived a life of prayer, and that was not something that ever ended. The Church supported all clergy as a corporate, spiritually mandated obligation, not as a generalized "social obligation" like social security, or what Bismarck instituted. If your point is that certain corporate groups took care of their privileged members when they no longer worked, that is one thing; if your point is that "retirement" as a condition that merited social welfare, in general, the clergy don't make that for you. They were exceptions to the general rule that people had to fend for themselves, a rule that applied to the entire third estate by definition from time immemorial.

Lastly, servants: those who "retired" in the nineteenth century very often did not have the same treatments as servants in the ancien regime, many of whom died in harness in any case. But, if their employing families did continue to provide for them, they did so not out of a sense they were meeting the "obligation of society to the retired," but as a matter of family or community duty, noblesse oblige. It was completely at the mercy and discretion of the family involved. It was a matter of personal honor, and still is, when servants have been your friends and companions and have prepared and eaten the same food you have, and cleaned your mess and watched your back and brushed your horses and trained you to ride, and seen your youthful foolishness, sometimes for generations. Those are not "obligations of society"; they are personal and family and moral obligations. So Cato the Elder took some heat for his recommendations on discarding old and broken down slaves, but nobody suggested it was up to the Republic to pay for them instead. Since you're going to the ancient world, you might better have used that example than that of the soldiers.

And so all that is what Hudson is not talking about. He's talking about Bismarck's social security as a moral precedent, reflecting a widely held belief in the popular right to a social safety net after a certain age.

So of course some people were "pensioned." They were called "pensioners," and many of them were not at all "retired," but had gone on to work at other things, like soldiers who opened up fish-and-chips shops (q.v.). That does not mean that there was ever a Gesellschaft-like concept of "retirement" as a condition that brought the right to support by the commonwealth; not before Bismarck. That's what Hudson's reference tries to imply, that such a concept was common in the 19th century, at a widespread societal level in Western Civilization, and it is provably, demonstrably, obviously wrong. If it weren't, why would the Old-Age Pensions Act 1908 have ever been passed?

"Nobody anticipated in the 19th century that people would have to pay for their own retirement. That was viewed as an obligation of society."

You simply cannot construe that to have any truth, given the facts of the century. You can straw-man me about the concept of "retirement" all you like, although you are still wrong there, because the groups you name aren't people who "work for a living," which is the third estate; they are the first and second estates, and their adherents: those who fight for a living, and pray for a living, and those who obey them.

So the fact remains that Hudson's statement was just polemical fluff, and no historian worth the name should have uttered it. I guess I'll sit here and wait for his response, because yours, well .

fresno dan , March 9, 2017 at 11:05 am

"He didn't call FICA wage withholding a tax, but of course it is."

This just drives me to apoplexy. 1, that it is not called a tax, and 2, that wage taxes are never ever reduced.
Incessant yammering about "incentives" – but doesn't a wage tax disincentivise both employers and employees with regard to wage work? – – Endless talk about how CEO's can't do ANYTHING unless their taxes are REDUCED!!!!!!! But somehow .that just goes out the window when it comes to wages – TAXES MUST GO UP.
Cheney – deficits don't matter .except apparently with regard to social security ..

The other scam about FICA and its "separate" funding is that social security being in balance is OH SO IMPORTANT – deficits will be the death of it. Yet the general fund is in deficit (see Mish today for a bunch of stuff on the hypocrisy of repubs on the deficit) and ever more deficit and nobody seriously cares about it or worries about it. MONEY can always be found for invading for Iraq, and paying for invading anybody is NEVER a problem. Feeding old folks, on the other hand, sure strains the resources
Its like it is as important to keep a reserve army of the impoverished as it is to keep the empire.

Dead Dog , March 9, 2017 at 1:22 pm

FD -'This just drives me to apoplexy' Breathe, buddy.

Yes, mate, feeding old folks – looking after the oldies so they have health care, decent food and a home.

How well each country does it reflects their views on whether it's a social obligation. For many countries, there is no safety net and families provide the care, if they can.

It's becoming that way in the west too. I don't see many governments increasing welfare for our poorest people, benefits are being gutted and those that did save for retirement are seeing their funds looted and zero interest paid

Hemang , March 9, 2017 at 11:17 am

Life in Indian joint family is great- no retirement work- food for life for a member- great lack of boredoms and lonely depressions- life, life ,- exquisite vegetarian food fit for Gods- low tech human scale towns- GREAT TO BE ALIVE ON 3 dollars a day! This talk of retirement and working and senior junior savings is so pathetic that my sex drive just evaporated into thin air reading it! Get a life.

Disturbed Voter , March 9, 2017 at 12:51 pm

Destruction of the family by public and private corporations, with the assistance of disruption by multiple industrial revolutions is key.

Sluggeaux , March 9, 2017 at 11:25 am

It's good to read Michael Hudson's call-out of FICA as a mechanism to crush workers and transfer wealth to the already rich.

FICA is indeed the worse sort of deductive reasoning. It is based on the premise that the rich are entitled to be rich, and that the masses want to take their money from them. In America in particular, wealth has historically been based on grants from the sovereign to loot the commons (timber, agriculture, mineral extraction, railroads, military procurement, data mining, etc.). These grants to loot the commons have nearly always been based on corrupt practices of cronyism and bribery. Alchemists like Greenspan simply provide theo-classical mumbo-jumbo after-the-fact justification for their piracy.

Ironically, I was just reading about impending failure of the Oroville Dam, a prime example of America as the seat of greed. It was well-known that the spillways were inadequate and crumbling due to 50 years of use. However, the Reagan-ites of Southern California refused to tax themselves in order to save Oroville and Yuba City, 450 miles away.

It's sad that everyone, especially the rich, think that they can blow-up the United States and then fly to their bolt-hole in New Zealand or Australia - or if you're not so rich to a shack in Panama or Thailand. I suspect that we will soon find ourselves to be unwelcome pariahs in those places.

Arizona Slim , March 9, 2017 at 12:41 pm

And, if you're a freelancer like I am, you get to pay both sides of the FICA tax, employee and employer. Fun, fun!

Dead Dog , March 9, 2017 at 1:24 pm

They may be unwelcome by the masses, but money still talks and, if you haven't got any, well you just stay right where you are.

mk , March 9, 2017 at 1:25 pm

200,000 people (even if they all voted) is not a political threat to the state and feds.

Rick Zhang , March 9, 2017 at 8:30 pm

How is FICA a redistribution to the wealthy? If anything, what you pay in buys you a share of the distributions when you retire. That means the output is roughly proportional to the input you contribute. The wealthy stop contributing after roughly the $120,000 limit, but that doesn't mean they take an outsized distribution. They take home exactly the same (pre-tax) as someone who only made $120,000 per year.

If anything there's a bit of redistribution behind the scenes that favours the poor. See my earlier post. If you make too many changes to Social Security such that it becomes another welfare program, it will lose its popular backing and eventually get axed.

– Rick Zhang @ Millennial Lifehacker

MMT is the Key , March 9, 2017 at 12:30 pm

Neoliberalism is OUT-DATED. Rather, for the past four decades, it's been fiat currency for the .01% and gold standard straitjacket ideology for everyone else.

"The mainstream view is no longer valid for countries issuing their own non-convertible currencies and only has meaning for those operating under fixed exchange rate regimes,

'The two monetary systems are very different. You cannot apply the economics of the gold standard (or USD convertibility) to the modern monetary system. Unfortunately, most commentators and professors and politicians continue to use the old logic when discussing the current policy options. It is a basic fallacy and prevents us from having a sensible discussion about what the government should be doing. All the fear-mongering about the size of the deficit and the size of the borrowings (and the logic of borrowing in the first place) are all based on the old paradigm. They are totally inapplicable to the fiat monetary system' (Mitchell, 2009).

We might now consider the opportunity afforded by the new monetary reality, effectively modelled by MMT. A new socio-political reality is possible which throws off the shackles of the old. The government can now act as a currency issuer and pursue public purpose. Functional finance is now the order of the day. For most nations, issuing their own fiat currency under floating exchange rates the situation is different to the days of fixed exchange rates. Since the gold window closed a different core reality exists – one which, potentially at least, provides governments with significantly more scope to enact policies which benefit society.

However, the political layer, in the way it interacts with monetary reality, has a detrimental effect on the power of democratic governments to pursue public purpose. In the new monetary reality political arrangements that sprang up under the old regimes are no longer necessary or beneficial. They can largely be considered as self-imposed constraints on the system; in short the political layer contains elements which are out-of-date, ideologically biased and unnecessary. However, mainstream economists have not grasped this situation – or perhaps they cannot allow themselves to- because of the vice-like grip that their ethics and 'traditional' training has on them.

MMT provides the best monetary models out there and highlights the existence of additional policy space acquired by sovereign states since Nixon closed the gold window and most nations adopted floating exchange rates. We just need to encourage the use of the space to enhance the living standards of ordinary people."

Heterodox Views of Money and Modern Monetary Theory (MMT) by Phil Armstrong (York College) 2015

https://www.youtube.com/watch?v=d57M6ATPZIE

PhilM , March 9, 2017 at 2:08 pm

Hear, hear!

A new socio-political reality is possible which throws off the shackles of the old. The government can now act as a currency issuer and pursue public purpose. Functional finance is now the order of the day. For most nations, issuing their own fiat currency under floating exchange rates the situation is different to the days of fixed exchange rates. Since the gold window closed a different core reality exists – one which, potentially at least, provides governments with significantly more scope to enact policies which benefit society.

What I especially like about your post is that it finally takes the mask off and openly admits what everyone who tries to learn about MMT has realized at once: that for all of its utility in understanding money systems, it is designed and propounded with an agenda: to undermine the mores underlying centuries of private-property-based liberal capitalism. Those mores, which remain more than illusions despite the encroachments of central banks, are the last barrier to prevent state capitalism from becoming completely authoritarian, because as long as "taxation" is, at least theoretically, the limit on state spending and therefore power, then "representation" actually means something, and so representative democracy and property rights, which are the keys to a functioning productive civil society and underlie all human progress for eight hundred years, can survive a bit longer.

The very real and useful core of MMT, which describes what we see happening since the gold standard fell, and is therefore unimpeachable from a certain objective turn of mind, is Janus-faced. On the one hand, it acknowledges what the Framers knew intuitively when they gave the Federal government the power of issuing money: the sovereign makes the money. On the other, as often used here, and especially in your comment, it is a rationale for a government unrestrained by property rights and representative constraints on its power of expenditure. That will not end well, simply because it will not last long, and it will end in a military despotism or landed aristocracy (if you're lucky). Because it always has, and you are not going to change that, are you?

Jim , March 9, 2017 at 4:25 pm

In one of the recently discovered lectures (1940) by Karl Polanyi, in referring to post-war Europe (post 1918) he argued:

"The alternative was between an integration of society through political power on a democratic basis, or if democracy proved too weak, integration on an authoritarian basis in a totalitarian society, at the price of the sacrifice of democracy."

It is still the same issue today which PhilM nicely illuminates when he states: "..What I especially like about your post is that it finally takes the mask off and openly admits what everyone who tries to learn about MMT has realized at once: that for all of its utility in understanding money systems, it is designed and propounded with an agenda to undermine the mores underlying centuries of private-property-based liberal capitalism. These mores, which remain more than illusions despite the encroachments of central banks, are the last barrier to prevent state capitalism from becoming completely authoritarian, because as long as "taxation" is, at least theoretically, the limit on state spending and therefore power, then "representation" actually means something "

The national security state already has a potentially totalitarian hold on us and in the future the MMT scenario "as a rationale for a government unrestrained by property rights and representative constraints on its powers of expenditure" might nicely finish us off.

It would no longer be the neo-liberal present where the whole of society must be subordinated to the needs of the market system, but the other extreme, where the whole of society must be subordinated to the needs of the state supposedly working in the "public interest."

PhilM , March 9, 2017 at 5:48 pm

Thank you for your reply. You said it better than I did, especially with the citation of Polanyi, one of my personal heroes.

Grebo , March 9, 2017 at 7:27 pm

it is designed and propounded with an agenda: to undermine the mores underlying centuries of private-property-based liberal capitalism.

You say that like it's a bad thing :-)

the last barrier to prevent state capitalism from becoming completely authoritarian

State capitalism? If this is supposed to be a topical reference I don't get it.

as long as "taxation" is, at least theoretically, the limit on state spending and therefore power, then "representation" actually means something

How so? Did "taxation" restrain Bush from spending trillions on invasions? Can't you have representation without taxation?

representative democracy and property rights, which are the keys to a functioning productive civil society and underlie all human progress for eight hundred years

I thought that was the Catholic Church
"Property rights"-the private monopolisation of the gifts of nature-at least in their traditional form, seem to me to be the third fundamental flaw in our political economy, along with Capitalism (narrowly defined) and our bogus monetary ludibrium. We need a new Church.

Allegorio , March 9, 2017 at 2:20 pm

MMT: great stuff. With you 100%. The issue is corruption and this culture of privilege and corruption we live in. You better believe the government will be issuing currency for other than the public interest. The fact is we live in an MMT economy now, it's just that the currency created by the government is being passed out to the ethnically privileged .001%. The talk of deficits and national debt is all a smoke screen to cover up this fact. It is way past time to educate the masses on this theme, kudos to Michael Hudson & Steve Keen.

Katy , March 9, 2017 at 12:31 pm

J is for Junk Economics: Amazon's "#1 New Release in Business & Professional Humor." Facepalm.

Sluggeaux , March 9, 2017 at 1:02 pm

OMFG, you're not making this up!

Bezos really is a contraction of Beelzebub

Disturbed Voter , March 9, 2017 at 12:54 pm

One part of society parasitical on the productive part .. starts small. $1 per $1000, then $10 per $1000 until it gets to $1000 per $1000. Neither bought politicians, nor bought citizens, stays bought.

Of course we shouldn't expect women and children to work that is destructive of reproduction and child raising. Some women should work some children should work but only a few. Otherwise obvious system dynamics will reduce the net population in quality and quantity.

djrichard , March 9, 2017 at 1:13 pm

You're going to privatize the roads, so that now you're going to have to pay to use the road to drive to work, if you don't have public transportation.

This is a zero-sum game for the elite. They're already soaking us. If they soak us on tolls, they'll have to take less money soaking us another way.

In contrast, Fed Gov reducing spending is not a zero-sum game for the elite. That means less money to be soaked up from the public. Unless of course, the public compensates by taking out more private debt. In which case, ka ching for the elite again.

That said, I don't think the mind-set really is to reduce Fed Gov spending. Rather, the mind-set is to reduce entitlements so that other Fed Gov spending can be increased, namely on defense, intelligence communities, etc. And I really don't think the elite have much of a dog in that fight. After all, the elite suck up all the money regardless of how it's spent by the Fed Gov. So my guess is that this campaign to reduce entitlement spending is being waged by the other agencies in the Fed Gov and the eco-system that feeds off them.

susan the other , March 9, 2017 at 1:28 pm

In the 1980s Greenspan pushed for massive increases in FICA. And Reagan spent it on Star Wars. Recently I've read that that wasn't really a missile shield project but a cyber technology project. Today we read that the CIA has disseminated all this accumulated and obsolete technology; leased it out to private contractors; or variously bribed the Europeans with it. Etc. Fast-back to the 1930s and FDR took the same SS money for WW2. In the 60s, JFK agonized about the budget and the value of the dollar and could see no reason to go into Vietnam, but oops. LBJ bulldozed through Congress our Medicare plan, which upped SS contributions, and he went promptly into Vietnam, spending it all and stuffing the retirement funds with treasuries. Shouldn't we all be looking at how transitory these achievements (or disasters) have been. Maybe nothing more than boosting the economy for a few years every other decade or so. Money could achieve much more than this if we accepted as fact the fleeting benefits of misspending it and instead concentrated on a steady economy benefiting all. Hubris rules, but it doesn't ever make things better.

Jim Haygood , March 9, 2017 at 1:34 pm

'it's a myth that Social Security should be pre-funded by its beneficiaries' - Sharmini Peries

If it's a myth, it's one that's incorporated in the Social Security Act of 1935, as well as (for private pensions) the ERISA Act of 1974.

After about a century of experimentation, we know how to fund pensions securely: estimate the present value of the future liability using an appropriate discount rate, and then keep it funded on a current basis.

Social Security grossly violates this model in three respects. First, it is only about 20 percent funded, headed for zero in 2034 according to its own trustees.

Second, because Social Security does not avail itself of the Capital Asset Pricing Model developed in the 1960s, it invests in low-return Treasuries, which causes required contributions to be cruelly high. Had Soc Sec been invested in a 60/40 mix of stocks and bonds, FICA taxes could have been half their current level and funded higher benefits.

Third and finally, Social Security is treated as an off balance sheet obligation in the Financial Report of the United States. Unlike the legally enforceable obligation of private pension sponsors to make good on their promises, the government refuses to take responsibility and put itself on the hook. The Supreme Court has ruled that Social Security essentially is a welfare program, which Congress can cut back or cancel at will. So much for "security" - there isn't any.

Social Security is part of a general pattern of government taking a sleazy, second-rate approach to its social promises, by exempting itself from well-established prudential rules mandating best practices. Frank Roosevelt wanted his constituents to be forever dependent on the kindness of perfidious politicians. He got his wish.

a different chris , March 9, 2017 at 4:18 pm

>we know how to fund pensions securely: estimate the

C'mon Jim you can do better than that. Here is dictionary.com, do you see the problem with your statement?

know:
verb (used with object), knew, known, knowing.
1. to perceive or understand as fact or truth; to apprehend clearly and with certainty:

estimate
verb (used with object), estimated, estimating.
1.to form an approximate judgment or opinion regarding the worth, amount, size, weight, etc., of; calculate approximately:

ajea , March 9, 2017 at 8:15 pm

If it's a myth, it's one that's incorporated in the Social Security Act of 1935, as well as (for private pensions) the ERISA Act of 1974.

You're incorrect.

Read Luther Gulick's memo to FDR. Read to the end:
https://www.ssa.gov/history/Gulick.html

Jim A , March 9, 2017 at 2:10 pm

When you lend money to the profligate, they are happy. When you ask to be repaid, they are furious. It turns out that is just as true when workers who payroll taxes on their whole income "lend money" to the wealthy by paying excess amounts to the SS trust fund which in turn, enabled tax cuts for the wealthy. The wealthy are incensed that the SS trust fund, which has "lent" trillions to the treasury is now demanding to be "repaid" with interest.

Tim , March 9, 2017 at 2:40 pm

That's the trick about S.S. that gets me. You cannot pay in 15% of your income with some amount of reasonable compounding interest for your entire career and not have a massive nest egg at the end. But the math is done straight up such that there never was interest on the payments, so we are entitled to very little, despite every other form of investing on the planet returning some kind of interest.

It's one of the reasons I argue for a Sovereign Wealth Fund to retain and manage all SS recepts, so at least the contributions and return on investment are accounted for in plain sight, so nobody can bait and switch.

And heaven forbid the Sovereign wealth fund could also be used as government bank that loans (our) money direct to citizens, without private banks getting a cut.

It ain't utopia, but it is a way of playing their game and still winning results and the pr war even in the face of the most anti-sociailst conservative.

Tim , March 9, 2017 at 2:33 pm

We need to keep up with the Feudalism 2.0 Moniker.

We continue to refine society towards only 4 classes of people:
Warlords/Politicians
Productivity Owners
Rent Extractors
The Oppressed

Over the last 35 years the productivity owners have been making a run, vacuuming up all the productivity improvements leaving everybody else stagnant, before considering inflation, but with the robotic age coming, they are just getting warmed up.

a different chris , March 9, 2017 at 4:23 pm

>but with the robotic age coming, they are just getting warmed up.

Hmmm.

Henry Ford II: Walter, how are you going to get those robots to pay your union dues?
Walter Reuther: Henry, how are you going to get them to buy your cars?

Apparently not an actual quote, but one Reuther certainly endorsed.

You know "they" are just planning to kill 2/3 of us off, don't you? The elite are evil and sure many of them are stupid, but far from all of them.

ChrisAtRU , March 9, 2017 at 4:07 pm

"You're turning the economy into what used to be called feudalism. Except that we don't have outright serfdom, because people can live wherever they want. But they all have to pay to this new hereditary 'financial/real estate/public enterprise' class that is transforming the economy."

Spot.On.

From Marx's "Capital", Chapter 26 (The Secret of Primitive Accumulation):

"The industrial capitalists, these new potentates, had on their part not only to displace the guild masters of handicrafts, but also the feudal lords, the possessors of the sources of wealth. In this respect, their conquest of social power appears as the fruit of a victorious struggle both against feudal lordship and its revolting prerogatives, and against the guilds and the fetters they laid on the free development of production and the free exploitation of man by man. The chevaliers d'industrie, however, only succeeded in supplanting the chevaliers of the sword by making use of events of which they themselves were wholly innocent. They have risen by means as vile as those by which the Roman freedman once on a time made himself the master of his patronus.

The starting point of the development that gave rise to the wage labourer as well as to the capitalist, was the servitude of the labourer. The advance consisted in a change of form of this servitude, in the transformation of feudal exploitation into capitalist exploitation. "

[Feb 25, 2017] The main challenges in this new era is to reduce the level of inequality from neoliberal level to New Deal levels

Notable quotes:
"... The Democrats' central weakness comes from being a party of business but having to pretend otherwise. ..."
"... Since Donald Trump was inaugurated as the president of the United States, things have been moving so quickly it's hard to pause and take stock of our surroundings - let alone evaluate how we arrived at this nightmarish place. ..."
"... 'Ironically, both Stiglitz and Sanders have declared themselves to be democrats" ..."
"... I was a Democrat before and would be again. But, that would require that the neocons and neoliberals would be replaced by progressives. ..."
"... Shumer was elected Senate minority leader and that is a bad sign to me. He is sponsored by both neocons and neoliberals. ..."
"... Joe wants to be allowed to speak his piece. If he irritates the plutocrats too much they will cut off his access to media. ..."
Feb 25, 2017 | economistsview.typepad.com
RGC : February 21, 2017 at 07:31 AM

Re: Joe Stiglitz:

Joe says: "One of the main challenges in this new era will be to remain vigilant and, whenever and wherever necessary, to resist."

I disagree. I think we need a clearly articulated alternative to Trump and I think Joe provided one in his recent comment:

Joseph Stiglitz Says Standard Economics Is Wrong. Inequality and Unearned Income Kills the Economy

The rules of the game can be changed to reverse inequality

http://evonomics.com/joseph-stiglitz-inequality-unearned-income/

In that comment Joe says:

Reversing inequality

A wide range of policies can help reduce inequality.

Policies should be aimed at reducing inequalities both in market income and in the post-tax and-transfer incomes. The rules of the game play a large role in determining market distribution- in preventing discrimination, in creating bargaining rights for workers, in curbing monopolies and the powers of CEOs to exploit firms' other stakeholders and the financial sector to exploit the rest of society. These rules were largely rewritten during the past thirty years in ways which led to more inequality and poorer overall economic performance. Now they must be rewritten once again, to reduce inequality and strengthen the economy, for instance, by discouraging the short-termism that has become rampant in the financial and corporate sector.

Reforms include more support for education, including pre-school; increasing the minimum wage; strengthening earned-income tax credits; strengthening the voice of workers in the workplace, including through unions; and more effective enforcement of anti-discrimination laws. But there are four areas in particular that could make inroads in the high level of inequality which now exists.

First, executive compensation (especially in the US) has become excessive, and it is hard to justify the design of executive compensation schemes based on stock options.

Executives should not be rewarded for improvements in a firm's stock market performance in which they play no part. If the Federal Reserve lowers interest rates, and that leads to an increase in stock market prices, CEOs should not get a bonus as a result. If oil prices fall, and so profits of airlines and the value of airline stocks increase, airline CEOs should not get a bonus. There is an easy way of taking account of these gains (or losses) which are not attributable to the efforts of executives: basing performance pay on the relative performance of firms in comparable circumstances. The design of good compensation schemes that do this has been well understood for more than a third of a century, and yet executives in major corporations have almost studiously resisted these insights. They have focused more on taking advantages of deficiencies in corporate governance and the lack of understanding of these issues by many shareholders to try to enhance their earnings- getting high pay when share prices increase, and also when share prices fall. In the long run, as we have seen, economic performance itself is hurt.

Second, macroeconomic policies are needed that maintain economic stability and full employment. High unemployment most severely penalises those at the bottom and the middle of the income distribution. Today, workers are suffering thrice over: from high unemployment, weak wages and cutbacks in public services, as government revenues are less than they would be if economies were functioning well.

As we have argued, high inequality has weakened aggregate demand. Fuelling asset price bubbles through hyper-expansive monetary policy and deregulation is not the only possible response. Higher public investment- in infrastructures, technology and education- would both revive demand and alleviate inequality, and this would boost growth in the long-run and in the short-run. According to a recent empirical study by the IMF, well-designed public infrastructure investment raises output both in the short and long term, especially when the economy is operating below potential. And it doesn't need to increase public debt in terms of GDP: well-implemented infrastructure projects would pay for themselves, as the increase in income (and thus in tax revenues) would more than offset the increase in spending.

Third, public investment in education is fundamental to address inequality. A key determinant of workers' income is the level and quality of education. If governments ensure equal access to education, then the distribution of wages will reflect the distribution of abilities (including the ability to benefit from education) and the extent to which the education system attempts to compensate for differences in abilities and backgrounds. If, as in the United States, those with rich parents usually have access to better education, then one generation's inequality will be passed on to the next, and in each generation, wage inequality will reflect the income and related inequalities of the last.

Fourth, these much-needed public investments could be financed through fair and full taxation of capital income. This would further contribute to counteracting the surge in inequality: it can help bring down the net return to capital, so that those capitalists who save much of their income won't see their wealth accumulate at a faster pace than the growth of the overall economy, resulting in growing inequality of wealth. Special provisions providing for favourable taxation of capital gains and dividends not only distort the economy, but, with the vast majority of the benefits going to the very top, increase inequality. At the same time they impose enormous budgetary costs: 2 trillion dollars from 2013 to 2023 in the US, according to the Congressional Budget Office. The elimination of the special provisions for capital gains and dividends, coupled with the taxation of capital gains on the basis of accrual, not just realisations, is the most obvious reform in the tax code that would improve inequality and raise substantial amounts of revenues. There are many others, such as a good system of inheritance and effectively enforced estate taxation.

Redefining economic performance

We used to think of there being a trade-off: we could achieve more equality, but only at the expense of overall economic performance. It is now clear that, given the extremes of inequality being reached in many rich countries and the manner in which they have been generated, greater equality and improved economic performance are complements.

This is especially true if we focus on appropriate measures of growth. If we use the wrong metrics, we will strive for the wrong things. As the international Commission on the Measurement of Economic Performance and Social Progress argued, there is a growing global consensus that GDP does not provide a good measure of overall economic performance. What matters is whether growth is sustainable, and whether most citizens see their living standards rising year after year.

Since the beginning of the new millennium, the US economy, and that of most other advanced countries, has clearly not been performing. In fact, for three decades, real median incomes have essentially stagnated. Indeed, in the case of the US, the problems are even worse and were manifest well before the recession: in the past four decades average wages have stagnated, even though productivity has drastically increased.

As this essay has emphasised, a key factor underlying the current economic difficulties of rich countries is growing inequality. We need to focus not on what is happening on average- as GDP leads us to do- but on how the economy is performing for the typical citizen, reflected for instance in median disposable income. People care about health, fairness and security, and yet GDP statistics do not reflect their decline. Once these and other aspects of societal well-being are taken into account, recent performance in rich countries looks much worse.

The economic policies required to change this are not difficult to identify. We need more investment in public goods; better corporate governance, antitrust and anti-discrimination laws; a better regulated financial system; stronger workers' rights; and more progressive tax and transfer policies. By 'rewriting the rules' governing the market economy in these ways, it is possible to achieve greater equality in both the pre- and post-tax and transfer distribution of income, and thereby stronger economic performance.


[Joe had it right with this essay and progressives should elaborate and emphasize this message - not just rant about Trump.]

[The whole essay is worth reading, imo.]

RGC -> RGC... , February 21, 2017 at 07:42 AM
I don't trust the Democratic party.

I fear that if they did defeat trump, they would go back to the same old policies that have given us this mess.

I want to see new leadership that commits to new policies like those articulated by Joe Stiglitz and Bernie Sanders.

I don't want to work for them until I see new policies emerge.

pgl -> RGC... , February 21, 2017 at 07:45 AM
Max Sawicky has a new blog. You might enjoy this description of what his new blog will be about:

http://thepopulist.buzz/2017/02/16/who-we-are-what-we-do/

RGC -> pgl... , February 21, 2017 at 08:04 AM
Thanks for the link.
Peter K. -> pgl... , February 21, 2017 at 08:15 AM
CNN is running a debate tomorrow night 10 eastern between Perez and Ellison. Who are you supporting, if anyone?
libezkova -> RGC... , February 21, 2017 at 07:56 AM
"I don't trust the Democratic party."

That's the key point of the whole discussion. Dems are just a party of neoliberals. Who are in the pocket of Wall Street.

So they are in the pocket of the same guys who bought Republicans (and both parties are also puppets of MIC -- with Dems becoming the major War party; not that different from neocons ).

Stiglitz actually is very shy to criticize neoliberal "cult of GDP":
== quote ==
As this essay has emphasised, a key factor underlying the current economic difficulties of rich countries is growing inequality. We need to focus not on what is happening on average - as GDP leads us to do- but on how the economy is performing for the typical citizen, reflected for instance in median disposable income.

People care about health, fairness and security, and yet GDP statistics do not reflect their decline.

Once these and other aspects of societal well-being are taken into account, recent performance in rich countries looks much worse.

== end of quote ==

This is why "pro growth liberals" are just crooks in disguise... With a smoke screen of mathematical nonsense and obscure terminology to cover their tracks.

RGC -> libezkova... , February 21, 2017 at 08:12 AM
"This is why "pro growth liberals" are just crooks in disguise... With a smoke screen of mathematical nonsense and obscure terminology to cover their tracks."

Agreed. They originated with John Bates Clark and the neoclassical concept of marginal utility:

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

kurt -> RGC... , February 21, 2017 at 11:56 AM
So you don't think Marginal Utility is a thing? And that it would be good to ignore this thing that you believe doesn't exist? Wow.
RGC -> kurt... , February 21, 2017 at 12:11 PM
I think it is a concept that was used by Clark and other neoclassicals to counter Henry George's arguments for a tax on rentiers and then later to obfuscate the role played by finance:

Henry George and john Bates Clark

Henry George was the most popular economist of his day. Why did "elite" economists choose to follow the lead of John Bates Clark instead of George?
IOW, elite economists had various theories to choose from. Why did they choose a theory that neglcted unearned income?
.........................................................
"RA: So let me suggest that there is an alternative, and get your thoughts on this, because this idea has run its course. People are now starting to wake up and say" enough." You've written a lot about unearned versus earned wealth – unearned wealth or unearned increment, if you like – and it goes back to a man called John Bates Clark. He was one of the first neoclassical economists. I think I'm right in saying that. Just talk a bit about him, he said there was no differentiation, is that right?
MH: Yes.
RA: And that seemingly innocuous proclamation has had huge effects.

MH: By the 1870s and '80s there was a lot of pressure in all countries, especially in the United States, by socialists on the one hand and followers of the journalist Henry George on the other. George wanted to tax away the land's economic rent and use that as the tax base, instead of taxing labor and industry. So John Bates Clark wrote about the philosophy of wealth, and said "There's no such thing as unearned income. Everything that the economists before me have written is wrong. Everybody earns exactly what they contribute to national product and that means that whatever their earnings are will be added to national product.""

http://michael-hudson.com/2016/12/innocuous-proclaimations/
..........................................................
Henry George (September 2, 1839 – October 29, 1897) was an American political economist, journalist, and philosopher. His immensely popular writing is credited with sparking several reform movements of the Progressive Era, and inspiring the broad economic philosophy known as Georgism, based on the belief that people should own the value they produce themselves, but that the economic value derived from land (including natural resources) should belong equally to all members of society.
His most famous work, Progress and Poverty (1879), sold millions of copies worldwide, probably more than any other American book before that time. The treatise investigates the paradox of increasing inequality and poverty amid economic and technological progress, the cyclic nature of industrialized economies, and the use of rent capture such as land value tax and other anti-monopoly reforms as a remedy for these and other social problems.
............................................
Furthermore, on a visit to New York City, he was struck by the apparent paradox that the poor in that long-established city were much worse off than the poor in less developed California. These observations supplied the theme and title for his 1879 book Progress and Poverty, which was a great success, selling over 3 million copies. In it George made the argument that a sizeable portion of the wealth created by social and technological advances in a free market economy is possessed by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the main cause of poverty. George considered it a great injustice that private profit was being earned from restricting access to natural resources while productive activity was burdened with heavy taxes, and indicated that such a system was equivalent to slavery – a concept somewhat similar to wage slavery. This is also the work in which he made the case for a land value tax in which governments would tax the value of the land itself, thus preventing private interests from profiting upon its mere possession, but allowing the value of all improvements made to that land to remain with investors.[27][28]
................................
https://en.wikipedia.org/wiki/Henry_George
..................................................
John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist. He was one of the pioneers of the marginalist revolution and opponent to the Institutionalist school of economics, and spent most of his career as professor at Columbia University.
............................................................
The foundation of Clark's further work was competition: "If nothing suppresses competition, progress will continue forever".[8] Clark: "The science adapted is economic Darwinism. Though the process was savage, the outlook which it afforded was not wholly evil. The survival of crude strength was, in the long run, desirable".[9] This was the fundament to develop the theory which made him famous: Given competition and homogeneous factors of production labor and capital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital.

This theorem is a cornerstone of neoclassical micro-economics.
Clark stated it in 1891[10] and more elaborated 1899 in The Distribution of Wealth.[11] The same theorem was formulated later independently by John Atkinson Hobson (1891) and Philip Wicksteed (1894).

The political message of this theorem is: "[W]hat a social class gets is, under natural law, what it contributes to the general output of industry."[12]

......................................
https://en.wikipedia.org/wiki/John_Bates_Clark
............................
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge".[1] According to The Chronicle of Higher Education, it "is widely regarded as one of the field's most prestigious awards, perhaps second only to the Nobel Memorial Prize in Economic Sciences."[2] The award was made biennially until 2007, but is being awarded every year from 2009 because many deserving went unawarded.[3] The committee cited economists such as Edward Glaeser and John A. List in campaigning that the award should be annual. Named after the American economist John Bates Clark (1847–1938), it is considered one of the two most prestigious awards in the field of economics, along with the Nobel Prize.
https://en.wikipedia.org/wiki/John_Bates_Clark_Medal
.....................................................

RGC -> RGC... , February 21, 2017 at 12:23 PM
Furthermore;

Cambridge capital controversy:

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

"It is important, for the record, to recognize that key participants in the debate openly admitted their mistakes. Samuelson's seventh edition of Economics was purged of errors. Levhari and Samuelson published a paper which began, 'We wish to make it clear for the record that the nonreswitching theorem associated with us is definitely false. We are grateful to Dr. Pasinetti...' (Levhari and Samuelson 1966). Leland Yeager and I jointly published a note acknowledging his earlier error and attempting to resolve the conflict between our theoretical perspectives. (Burmeister and Yeager, 1978).

However, the damage had been done, and Cambridge, UK, 'declared victory': Levhari was wrong, Samuelson was wrong, Solow was wrong, MIT was wrong and therefore neoclassical economics was wrong. As a result there are some groups of economists who have abandoned neoclassical economics for their own refinements of classical economics. In the United States, on the other hand, mainstream economics goes on as if the controversy had never occurred. Macroeconomics textbooks discuss 'capital' as if it were a well-defined concept - which it is not, except in a very special one-capital-good world (or under other unrealistically restrictive conditions). The problems of heterogeneous capital goods have also been ignored in the 'rational expectations revolution' and in virtually all econometric work." (Burmeister 2000)

RGC -> RGC... , February 21, 2017 at 12:29 PM
Wow.
yuan -> libezkova... , February 21, 2017 at 12:17 PM

Too uninformed and angry to realize that Stiglitz has focused on inequality and criticized the use of GDP to measure societal economic activity.


https://www.theguardian.com/commentisfree/2009/sep/13/economics-economic-growth-and-recession-global-economy

I also strongly recommend Stiglitz's book:

http://www.goodreads.com/book/show/16685439-the-price-of-inequality

Jesse -> RGC... , February 21, 2017 at 07:58 AM

Well stated, and that is what it would take to achieve 'party unity.'

In other words, put the people and principles first, and then the health and growth of the party will fall into place.

Party first is power first. And that allure for money and power is what wrecked the Democratic party as it had been-- although that failure was a long time coming.

Peter K. -> Jesse... , February 21, 2017 at 09:51 AM
https://www.jacobinmag.com/2017/02/trump-election-hillary-clinton-racism-democratic-party/

Good interview with Doug Henwood:

The Confusion Candidate

The Democrats' central weakness comes from being a party of business but having to pretend otherwise.

by Katie Halper & Doug Henwood

Since Donald Trump was inaugurated as the president of the United States, things have been moving so quickly it's hard to pause and take stock of our surroundings - let alone evaluate how we arrived at this nightmarish place.

And the liberal commentariat hasn't helped, arguing that the autopsies on Hillary Clinton's failed campaign do nothing but sabotage the "unity" needed to fight Trump. But if we don't want round two against the Right to resemble round one, we need to know what went wrong and how to fix it.

..."

yuan -> RGC... , February 21, 2017 at 12:23 PM
"I don't trust the Democratic party."

Ironically, both Stiglitz and Sanders have declared themselves to be democrats:

I don't trust Sanders or Stiglitz but am somewhat encouraged that both have shown modest support for anti-capitalist reforms.

RGC -> yuan... , February 21, 2017 at 12:51 PM
'Ironically, both Stiglitz and Sanders have declared themselves to be democrats"

I was a Democrat before and would be again. But, that would require that the neocons and neoliberals would be replaced by progressives.

RGC -> RGC... , February 21, 2017 at 01:08 PM
Shumer was elected Senate minority leader and that is a bad sign to me. He is sponsored by both neocons and neoliberals.

I want to see if Ellison is elected chair of the DNC.

Peter K. -> yuan... , February 21, 2017 at 01:36 PM
"I don't trust Sanders or Stiglitz but am somewhat encouraged that both have shown modest support for anti-capitalist reforms."

You're a lunatic troll. No wonder PGL likes you.

Peter K. -> RGC... , February 21, 2017 at 08:16 AM
why didn't "Joe" back Bernie Sanders?

Inquiring minds want to know.

RGC -> Peter K.... , February 21, 2017 at 09:14 AM
Joe wants to be allowed to speak his piece. If he irritates the plutocrats too much they will cut off his access to media.

He is a bit too timid for my taste.

[Feb 21, 2017] The Term "Deep State" in Focus: Usage Examples, Definition, and Phrasebook

Notable quotes:
"... By Lambert Strether of Corrente . ..."
"... The Atlantic ..."
"... derin devlet ..."
"... Glenn Greenwald, Democracy Now! ..."
"... Peggy Noonan, Patriot Post ..."
"... Breitbart ..."
"... Jefferson Morley, Alternet ..."
"... Greg Grandin, The Nation ..."
"... Benjamin Wallace, The New Yorker ..."
"... Counterpunch ..."
"... New York Times ..."
"... Marc Ambinder, NPR ..."
"... Marc Ambinder, Foreign Policy ..."
"... "Deep State Blooper" ..."
"... "Deep State Operation" ..."
"... "Deep State Actor" ..."
"... "Deep State Faction" ..."
"... That's ..."
"... Extreme Prejudice: The Terrifying Story of the Patriot Act and the Cover Ups of 9/11 and Iraq ..."
"... Conjuring Hitler: How Britain and America Made the Third Reich ..."
"... within the territory of the State ..."
"... Arrogant Capital: Washington, Wall Street, and the Frustration of American Politics ..."
"... "permanent government" ..."
"... "permanent government", ..."
"... "permanent government", ..."
"... "conducting killings" ..."
"... The Deep State: The Fall of the Constitution and the Rise of a Shadow Government ..."
Feb 21, 2017 | www.nakedcapitalism.com
Posted on February 20, 2017 by Lambert Strether By Lambert Strether of Corrente .

Since today is President's Day, there will be no Water Cooler. Which is a good thing, because this puppy took forever to write. –lambert

* * *

"It's called the ruling class because it rules." –Arthur Silber

Readers know that I've been more than dubious about that incredibly virulent earworm of a term, "deep state" ( December 1, 2014 ). However, in the last week or so, "deep state" is all over mainstream discourse like kudzu, and so it's time to look at it again. As we shall see, it's no more well-defined than before, but I'm hoping that if we aggregate a number of usage examples, we'll come up with a useful set of properties, and a definition. Following the aggregation, I'll propose a number of phrases that I hope can attenuate deep state 's virulence, and render it a sharper and more subtle analytical tool in posts and comments.

While the usage of "deep state" exploded last week after General Flynn's defenestration by Trump, it seems likely to me that the term had been spreading in the recent past before that, given that a series of politically motivated leaks by the "intelligence community" (IC) from summer 2016 onwards could colorably be attributed to such an entity. The examples are in no particular order; I haven't had the time to find a "patient zero."

Usage Examples of "Deep State"

1. The Atlantic . Since "deep state" as a term originated in Turkey ( derin devlet ), I'll start with a Turkish analyst:

There Is No American 'Deep State'

Zeynep Tufekci, a Turkish sociologist and writer at the University of North Carolina, tweeted a string of criticisms about the analogy Friday morning. " Permanent bureaucracy and/or non-electoral institutions diverging with the electoral branch [is] not that uncommon even in liberal democracies," she wrote. "In the Turkey case, that's not what it means. There was a shadowy, cross-institution occasionally *armed* network conducting killings, etc. So, if people are going to call non electoral institutions stepping up leaking stuff, fine. But it is not 'deep state' like in Turkey."

Comment: One danger I always face is projecting American politics onto other countries. Tufekci warns us the opposite is a bad idea too!

Properties: Permanent bureaucracy and/or non-electoral institutions; "shadowy," cross-institutional. We cross out "conducting killings" for the American context (or do we?).

2. Glenn Greenwald, Democracy Now! . Greenwald thinks the term is sloppy too (though "scientific" is a high bar):

The deep state, although there's no precise or scientific definition , generally refers to the agencies in Washington that are permanent power factions . They stay and exercise power even as presidents who are elected come and go. They typically exercise their power in secret , in the dark, and so they're barely subject to democratic accountability, if they're subject to it at all. It's agencies like the CIA, the NSA and the other intelligence agencies, that are essentially designed to disseminate disinformation and deceit and propaganda, and have a long history of doing not only that, but also have a long history of the world's worst war crimes, atrocities and death squads. This is who not just people like Bill Kristol, but lots of Democrats are placing their faith in, are trying to empower, are cheering for as they exert power separate and apart from-in fact, in opposition to-the political officials to whom they're supposed to be subordinate.

Comment: Later in the show, Greenwald says that the deep state is "almost engag[ing] in like a soft coup." Here's the Kristol tweet to which Greenwald alludes, explicitly applauding that coup with the bracing clarity so foreign to most Democrats:

I characterized Greenwald's soft coup - and Kristol's - more delicately as "a change in the Constitutional Order" ( "Federalist 68, the Electoral College, and Faithless Electors" ) but the sense is the same.

Properties: Kristol, not normal, not democratic, not constitutional; Greenwald: permanent power factions, agencies, especially intelligence agencies, which specialize in deception and require secrecy.

3. Peggy Noonan, Patriot Post :

Is [the current chaos], as some suggest, "deep state" revenge for the haughty, dismissive way Donald Trump spoke of the U.S. intelligence community during and after the campaign? Is it driven by the antipathy of the permanent government toward Mr. Putin, and a desire to bring down those, like Mr. Trump, who hope for closer relations with Russia?

It is a terrible thing if suddenly, in America, there is a government within the government that hates the elected government - and that secretly, silently, and with no accountability , acts on it.

Properties: Government within a government; secret; not accountable.

4. Breitbart . I don't normally cite to Breitbart, but since they're in the heart of the battle and have a usage example:

The "deep state" is jargon for the semi-hidden army of bureaucrats, officials, retired officials, legislators, contractors and media people who support and defend established government policies .

Comment: Interestingly, Breitbart finds it necessary to define the term for its readership, meaning it didn't originate on the right. Even more interestingly, Breitbart - very much unlike the more staid Peggy Noonan - urges, in my view correctly, that actors outside the alphabet agencies need to be considered.

Properties: Bureaucrats, officials (some retired), legislators, contractors, media. Brietbart doesn't use Janine Werel's term, Flexian - retired officials become talking heads, for example - but the concept is implicit.

5. Jefferson Morley, Alternet :

What Is the 'Deep State'-And Why Is It After Trump?

The Deep State is shorthand for the nexus of secretive intelligence agencies whose leaders and policies are not much affected by changes in the White House or the Congress . While definitions vary, the Deep State includes the CIA, NSA, Defense Intelligence Agency, and components of the State Department, Justice Department, Department of Homeland Security, and the armed forces.

With a docile Republican majority in Congress and a demoralized Democratic Party in opposition, the leaders of the Deep State are the most-perhaps the only-credible check in Washington on what Senator Bob Corker (R-Tenn.) calls Trump's "wrecking ball presidency."

And Roger Stone, a man who knows his memes:

"This is an effort by the Deep State to destabilize the president," Stone said.

Comment: Morley, then, agrees with Kristol (the "only check" in Trump).

Properties: Intelligence agencies; permanent.

6. Greg Grandin, The Nation . A useful review of the literature:

What Is the Deep State?

So at least as long as there has been private property, there has been private plotting, and talk of a "deep state" has been a vernacular way of describing what political scientists like to call "civil society," that is, any venue in which powerful individuals, either alone or collectively, might try to use the state to fulfill their private ambitions, to get richer and obtain more power .

Much of the writing frames the question as Trump versus the Deep State, but even if we take the "deep state" as a valid concept, surely it's not useful to think of the competing interests it represents as monolithic , as David Martin in an e-mail suggests. Big Oil and Wall Street might want deregulation and an opening to Russia. The euphemistically titled "intelligence community" wants a ramped-up war footing. High-tech wants increased trade. In 1956, C. Wright Mills wrote that "the conception of the power elite and of its unity rests upon the corresponding developments and the coincidence of interests among economic, political, and military organizations." If nothing else, the "Trump v. Deep State" framings show that unity is long gone.

Comment: Grandin does give an early usage example, but I'm totally unpersuaded by his identification of the "deep state" with "civil society." Rather - as Breitbart, amazingly enough, suggests - the deep state more plausibly includes components of civil society (media, contractors, etc.).

Properties: Not monolithic; includes (components of) civil society.

7. Benjamin Wallace, The New Yorker :

The Deep-State Theory Cuts Both Ways

This pattern of dissent ["#TheResistance"], and its early successes, has brought about a vogue for the theory of the deep state, usually used in analyzing authoritarian regimes, in which networks of people within the bureaucracy are said to be able to exercise a hidden will of their own

The federal government employs two million people; its sympathies move in more than one direction. While many federal employees may want to oppose the White House, others (especially border-patrol and immigration agents, whose support Trump often cited on the campaign trail) have already been taking some alarming liberties to advance the President's politics.

Comment: Wallace urges that some Federal employees in the permanent bureaucracy are, in essence, "working toward the Fuhrer," which is a consequence of the deep state not being monolithic. He attributes the "vogue" for "deep state" to the resistance, but I (and most others cited here) think it's the Flynn firing.

Properties: Bureaucratic networks; hidden.

8. Counterpunch

A Deep State of Mind: America's Shadow Government and Its Silent Coup

So who or what is the Deep State?

It's the militarized police, which have joined forces with state and federal law enforcement agencies in order to establish themselves as a standing army. It's the fusion centers and spy agencies that have created a surveillance state and turned all of us into suspects. It's the courthouses and prisons that have allowed corporate profits to take precedence over due process and justice. It's the military empire with its private contractors and defense industry that is bankrupting the nation. It's the private sector with its 854,000 contract personnel with top-secret clearances, 'a number greater than that of top-secret-cleared civilian employees of the government.' It's what former congressional staffer Mike Lofgren refers to as 'a hybrid of national security and law enforcement agencies': the Department of Defense, the State Department, Homeland Security, the CIA, the Justice Department, the Treasury, the Executive Office of the President via the National Security Council, the Foreign Intelligence Surveillance Court, a handful of vital federal trial courts, and members of the defense and intelligence committees."

Comment: Seems pretty big to be deep

Properties: Law enforcement, contractors, agencies, the courts.

9. New York Times

As Leaks Multiply, Fears of a 'Deep State' in America

Though the deep state is sometimes discussed as a shadowy conspiracy, it helps to think of it instead as a political conflict between a nation's leader and its governing institutions.

That can be deeply destabilizing, leading both sides to wield state powers like the security services or courts against one another, corrupting those institutions in the process.

In countries like Egypt, Mr. El Amrani said, the line is much clearer.

There, "the deep state is not official institutions rebelling," he said, but rather "shadowy networks within those institutions, and within business, who are conspiring together and forming parallel state institutions."

Comment: Weird all around: The President is the President , the Chief Magistrate of the United States. He's not the "nation's leader," like in the title of sone kinda hardback in the "Business" section of your airport bookstore. And quite frankly, the description of the deep state in Egypt ("shadowy network," "parallel state institutions") jibes with a several of the other usage examples I've collected, right here in the United States.

Properties: I'll use Egypt's! Network, shadowy, businesses forming parallel state institutions.

10. Marc Ambinder, NPR :

With Intelligence Leaks, The 'Deep State' Resurfaces

GARCIA-NAVARRO: So how do you define the deep state?

AMBINDER: Well, I try to define it simply – maybe the national security and intelligence bureaucracy , the secret-keepers in the United States, people who have security clearances, who have spent 10 to 20 to 30 years working in and around secrets.

GARCIA-NAVARRO: So when we're hearing about this term this week to do with Michael Flynn, what do we – what are people making that connection with potentially a huge group of people and this particular case?

AMBINDER: They're essentially alleging that the national security state, this metastate that exists and, again, traffics totally in secret – used its collective power in order to bring down a duly chosen national security adviser because they disagreed with him or they disagreed with his president or they disagreed with his policies. It is a term of derision, a term that suggests people are using their power for ill-begotten ends. And that, if true, sets up a crisis.

Comment: Ambinder, then, rejects putting a "civil society" construction on "deep state." (He also rejects Greenwald, and Kristol's, "soft coup.")

Properties: National security and intelligence bureaucracy; long-term.

11. Marc Ambinder, Foreign Policy . Ambinder gives an example of the deep state in action:

Trump Is Showing How the Deep State Really Works

The fact the nation's now-departed senior guardian of national security was unmoored by a scandal linked to a conversation picked up on a wire offers a rare insight into how exactly America's vaunted Deep State works. It is a story not about rogue intelligence agencies running amok outside the law, but rather about the vast domestic power they have managed to acquire within it.

Sometime before January 12, the fact that these [Flynn's] conversations [with the Russian ambassador] had occurred was disclosed to David Ignatius, who wrote about them. That day, Sean Spicer asked Flynn about them. Flynn denied that the sanctions were discussed. A few days later, on January 16, Vice President Mike Pence repeated Flynn's assurances to him that the calls were mostly about the logistics of arranging further calls when Trump was President.

Comment: Note the lack of agency in "was disclosed." Had the deep state not been able to use David Ignatius as a cut-out, the scandal would never have occured. Therefore, a media figure, a member of civil society, was essential to the operation of the Deep State, even though Ambinder's definition of the deep state doesn't reflect this.

Properties: Network; civil society.

* * *

So now I'm going to aggregate the properties suggested by these 10 sources, and make some judgements about what to keep and what to throw away. Throwing out Noonan's concept of "a government within a government", I get this. The deep state:

1. Gains power through (legal) control of state functions of secrecy and deception

2. Is "permanent"

3. Is not monolithic

4. Is composed of "cross-institutional" networks of individuals in both state (agencies, law enforcement) and civil society (media, contractors)

5. Is not democratic in its operation; and (potentially) is not accountable, not normal, not constitutional.

(Individuals within the deep state belong to factions that compete and cooperate, often in addition to their "day jobs," rather as in a "matrix management" construct.)

So, what'd I miss?

A "Deep State" Phrasebook

So, here are some phrases to use that reflect the above - very tentative - understanding. What I really want to do - and who know, maybe I'm trying to shovel back the tide here, too - is get away from the notion of "the" deep state. The deep state is not monolithic! Factional conflict within the deep state exists! So, in my view, the definite article is in this case disempowering; it prevents you from, as it were, knowing your enemy. So, if I have to join the chorus of people using the term, I'm going to think carefully about how do it. This list is a step toward doing that. (I'm going to use examples from the run-up to the Iraq War because it's less tendenitious and way less muddled than the Flynn defenestration.)

1. "Deep State Blooper" . I'm putting this first as an antidote to CT. Quoting Frank Herbert's Dune :

" [I]t occurred to Kynes that his father and all the other scientists were wrong, that the most persistent principles of the universe were accident and error."

It's important to put into our thinking right from the start that Deep State actors are not all-powerful, and that Deep State operations are not invariably successful. I mean, can anybody look at the foreign and nationally security outcomes from what these guys are doing and urge that the baseline for performane is very high? I don't think so. Accidents happen all the time, and these guys, for all the power their positions bring them, are accident-prone. (After all, they're not accountable, so they never get accurate feedback, in a typical Banana Republic power dynamic.

Example: "The Iraq WMD's yellowcake uranium episode was a Deep State Blooper." ( See here for details; the yellowcake uranium was part of the Bush administration's WMD propaganda operation to foment the Iraq War.)

2. "Deep State Operation" . I think it's important to view the Deep State (as defined above) as able to act opportunistically; although many Deep State Actors work for agencies, their operations are not bureaucratic in nature.

Example: "The White House Iraq Group was a Deep State propaganda operation that succeeded tactically but failed strategically" (See here for details ; the WHIG planted stories in the press to foment the Iraq War. They succeeded in that narrow goal, but the war itself was a debacle, and the damage to the credibility of the press as an institution took a hit.)

3. "Deep State Actor" . An individual can be a member of the Deep State as an official, and then later as media personality or contractor. (It also seems to me that once you have been within the intelligence community, you can never be said to have left it, since how could anyone know you have really left?

Example: "Leon Panetta is a consummate Deep State Actor." ( Panetta has been OMB Director, CIA Director, White House Chief of Staff, and Secretary of Defense. "[Panetta] regularly obtains fees for speaking engagements, including from the Carlyle Group.[55] He is also a supporter of Booz Allen Hamilton."

4. "Deep State Faction" . This is a no-brainer:

Example: "The Neoconservatives are a Deep State Faction."

Conclusions

I apologize for the length as I fought my way through the material, and I hope I haven't made any gross errors - especially political science-y ones! And any further additions to the Deep State Phraseology will be very welcome (but watch those definite articles!).

1 0 27 0 0 This entry was posted in Banana republic , Politics on February 20, 2017 by Lambert Strether . About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism ("Because markets"). I don't much care about the "ism" that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don't much care, as long as the benefits are delivered. To me, the key issue - and this is why Medicare for All is always first with me - is the tens of thousands of excess "deaths from despair," as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics - even the worthy fight to help the refugees Bush, Obama, and Clinton's wars created - bright shiny objects by comparison. Hence my frustration with the news flow - currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press - a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let's call such voices "the left." Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn't allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I've been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

View all posts by Lambert Strether → Subscribe to Post Comments 109 comments Carolinian , February 20, 2017 at 2:21 pm

Gee you didn't even mention California's Bohemian Grove meeting where CEOs romp in togas and such.

And taken literally Deep State would presumably mean a secretive (deep) and more or less permanent ruling apparatus. We may have the latter but it doesn't seem all that secretive since they love to join think tanks and talk about their loony ideas. The term is often used to bolster conspiracy theories about how the CIA killed Kennedy and are secretly running the country. While recent movies like to portray CIA operatives as super human martial arts specialists they are just as likely boobs who make many mistakes but nevertheless don't mind ratting out Trump's phone calls as petty revenge. I'd say it's the not so secretive but still behind the scenes state we have to worry about. Think the CFR or that Kristol guy. In other words if the term means anything it could be the secondary tier of influencers who have the ear of our MSM.

sgt_doom , February 20, 2017 at 3:59 pm

Nothing theoretical about elements within the CIA (such as the fired Allen Dulles, and his still-in-the CIA cousin, Tracy Barnes - oopsy, Fake News never told you they were cousins, now did they?) - just requires a bit of reading and cross-referencing with declassified documents from the CIA, State and the FBI.

Deep State is really the financial-intelligence-complex who believes they are running things - the intel establishment was originally founded by the super-rich and their minions (such as Lovett and McCloy, etc.). When JFK was assassinated the Deputy Director of the CIA was Gen. Marshall Carter, recommended to McCone for that position by Nelson Rockefeller. And the fellow in charge of the reorganization of the CIA at the same time was Gen. Schuyler, Nelson Rockefeller's assistant.

You just have to look a bit . . .

Direction , February 20, 2017 at 4:34 pm

Juicy comment! Can you recommend any books or favorite articles?

James McFadden , February 20, 2017 at 11:42 pm

Some book recommendations about the deep state:

C. Wright Mills "The Power Elite" – describes how the indoctrination mechanisms create the deep state (military industrial political complex).

David Talbot "The Devil's Chessboard" – about the rise of the CIA and Allan Dulles

Laurence Shoup "Wall Street's Think Tank" – about the Council on Foreign Relations – the deep state's premier think tank

Michael Parenti "Dirty Truths" – about empire

John Perkins "Confessions of an Economic Hit Man" – CIA coups and soft coups

I'm sure other readers can recommend many more on this subject.

Caveat Emptor , February 21, 2017 at 12:39 am

The Deep State: The Fall of the Constitution and the Rise of a Shadow Government
Mike Lofgren

The American Deep State: Wall Street, Big Oil, and the Attack on U.S. Democracy
Peter Dale Scott

WhatsNotToLike , February 21, 2017 at 10:27 am

James Galbraith, Deep State: The Fall of the Constitution and the Rise of a Shadow Government

nonsense factory , February 21, 2017 at 12:55 am

There are a couple of books by Dan Briody that are very illuminating about how Deep State actors in government interface with corporate agendas:
The Halliburton Agenda: The Politics of Oil and Money (2004)
The Iron Triangle: Inside the Secret World of the Carlyle Group (2003)

I think of the Deep State as the military-industrial-intelligence-Congressional long-term national-security complex that grew up after World War II, there are perhaps four major elements:
(1) military and intelligence contractors who rely on the massive $600 billion military budget for their profits.
(2) executive branch bureaucrats who develop the contracts that are delivered to contractors (State/Pentagon/CIA/NSA/NRO/FBI/DOE etc.)
(3) Congressmembers (long-serving) on appropriations, intelligence, etc. committees who sign off on budget requests.
(4) Elements of mass media and think tanks who work overtime to promote the interests of the Deep State elements of the above actors.

It's a kind of self-perpetuating system that's primary agenda is to keep their budget from being cut by a healthy 50% – which is what we'd need to do to rebuild infrastructure, set up high-quality public education, and create a first-world health care system, i.e. to get up to German or Japanese standard-of-living norms.

Some have also pointed out that there's an element of the judicial branch that can be included in "Deep State" definitions (such as FISA Court); note that judicial review of executive foreign policy decisions is very rare in the American court system.

It's also factionalized; i.e. there's the nuclear weapons sector (DOE/NNSA and their contractors), the various Pentagon branches and their suppliers, NSA and their contractors, CIA and their contractors, etc. So they compete with each other for a share of the pie, but they all have a shared interest in preventing the overall pie from shrinking.

jo6pac , February 20, 2017 at 6:44 pm

Please a little help as Direction ask just to get us started. The dulles bros were truly evil and have trained their puppets well.

Vatch , February 20, 2017 at 7:18 pm

he intel establishment was originally founded by the super-rich and their minions (such as Lovett and McCloy, etc.).

Wow, Robert Lovett and John J. McCloy. For about three decades they were at the pinnacle of the United States Establishment. They were like Sejanus during the reign of Tiberius or Marcus Agrippa during the reign of Augustus. Very, very influential behind the scenes.

DH , February 20, 2017 at 8:08 pm

Yeah, and they totally missed Davos.

I always thought the original deep state was the networks of the Knights Templar, Masons, and Illuminati.

However, I was wrong – according to the definitions above, it is probably Treadstone and Blackbriar.

Enquiring Mind , February 20, 2017 at 2:23 pm

Rex Tillerson's dealing with the seventh floor apparatchiks at the State Department is another productive step in calling out the nomenklatura . Russian themes seem so popular these days.

Cat's paw , February 20, 2017 at 2:39 pm

Perhaps helpful to know the original provenance of the term it comes from Turkish journalism when one fine evening a sedan was involved in a nasty wreck. Passengers in said sedan included a high ranking military official, a state or federal(?) representative/official, a crime boss, and a beauty queen.

My understanding: trying to comprehend what such a collection of worthies were doing in the same car led journalists to coin the term deep state. A networked web of power interests/relations across sectors and institutions that operate beyond above below out of sight of normative or visible politics.

Emma , February 20, 2017 at 4:27 pm

Here are more details: https://en.wikipedia.org/wiki/Susurluk_scandal

Charles Tuttle , February 20, 2017 at 2:41 pm

David Chibo in Unz Review Political Science's "Theory of Everything"
http://www.unz.com/article/political-sciences-theory-of-everything/

neo-realist , February 20, 2017 at 9:05 pm

I checked out that article from a previous post of the link and thought it was a very valuable, terrific and detailed explanation of Deep State theories w/ some fine literature recommendations.

Grebo , February 20, 2017 at 10:45 pm

The totality of truths is that the US "elephant" consists of a power elite hierarchy overseeing a corporatocracy, directing a deep state that has gradually subverted the visible government and taken over the "levers of power."

Complete with tables and diagrams! A must read IMHO.

oh , February 21, 2017 at 8:51 am

It's a good recommendation and well worth reading.

Qufuness , February 20, 2017 at 2:42 pm

People within the American Deep State are said to have compassed the removal of General Flynn, who was a prominent member of DS organizations himself, so yes, the DS is not a monolith. But are there powerful "permanent" factions with the DS that pursue long-term strategies?

There is another way of asking this. Much of what is now labelled "DS" grew out of the investment-banker+intelligence nexus in the immediate postwar period, or at least came to the surface around that time. America has made a series of disastrous unforced errors in the past 70 years, Vietnam and Iraq being the most prominent examples. While these errors have been harmful to the American people at large, is there a clique (besides the Military Industrial Complex) that benefits from these "errors," that has far-reaching goals that completely diverge from those of American constitutional democracy?

Minh , February 20, 2017 at 5:58 pm

Both Kennedy's and Diem brothers' assasinations and 911 mass murders were deep events to sell and organize war for the Empire part of American democracy. Not mentioning Peter Dale Scott is a minus of the listing of properties. What does the Deep state did ? 911 and JFK so Afghan Iraq and Vietnam wars.

ex-PFC Chuck , February 20, 2017 at 8:33 pm

It's my understanding that the investment banking crowd served as the government's intelligence arm on an informal, sub rosa basis well before WW II. Prescott Bush, GHWB's father, was involved in that.

Mark P , February 20, 2017 at 2:48 pm

Lambert, there is a Deep State in the U.S. as distinct from the mere ruling class (and yes, by definition, it has competing factions and power centers at different agencies).

A clarifying example of that is this guy, Andy Marshall, aka Yoda, who arguably had more effect on the direction of U.S. policy than any U.S. president over the last half-century and was finally removed from heading the Pentagon's Office of Net Assessment just before his 95th birthday. That's power.
https://en.wikipedia.org/wiki/Andrew_Marshall_(foreign_policy_strategist)#cite_note-5

Yet most people have never heard of Marshall and he never enriched himself particularly. You won't be able to tell the influence he exerted from his Wiki page either, except perhaps for the mention of Marshall 'proteges' being the likes of Rumsfeld, Cheney, etc. Furthermore, before Nixon installed him at the Pentagon, in the 1950s and 60s Marshall was at the RAND corporation helping to formulate nuclear strategy.

Here's an old trove of press material from over the years.
https://web.archive.org/web/20070309161816/http://portland.indymedia.org:80/en/2004/02/281049.shtml

Emma , February 20, 2017 at 4:04 pm

Interesting. And taking into account the comment from Cat's Paw above, I'd suggest to Lambert there are two distinct components to the term 'Deep State'. One element comprises the majority ie. the facilitators who foster the deep state, while the other element consists of the all-important minority ie. the instigators or 'deep state en nom propre' .

michael hudson , February 20, 2017 at 2:50 pm

I think the key to the "Deep state" is simply COVERT.
It is all covert activities that a public relations officer for the neocons and neoconservatives would not acknowledge in their fairy-tale view of the state.

Mark P. , February 20, 2017 at 2:53 pm

Yes.

Josh Stern , February 20, 2017 at 3:18 pm

Technical note – for CIA/Pentagon, a *covert* activity is something that is known, but where US influence or the extent of that is supposed to stay hidden – e.g. a coup d'etat. And a *clandestine activity* is something where the entire activity is supposed to stay hidden – e.g. CIA running Heroin and Cocaine, unlicensed human experimentation, or controlling the editorial desk & ownership if the Washington Post. In that sense, the clandestine activity are even deeper, and the set of people in the know, is even smaller.

Jim Haygood , February 20, 2017 at 3:58 pm

" barely subject to democratic accountability, if they're subject to it at all " - Glenn Greenwald

The $50 billion-plus black budget for the IC, covering many clandestine projects and activities, is not even subject to Congressional accountability. It is discussed verbally with the majority and minority leaders, and the ranking members of the intelligence committees.

Then the other 427 members (or at least a majority of them) are obliged on instructions from their caucus to whoop it through, without a clue (or even a right to ask) what is in it. To paraphrase the great stateswoman Nancy Pelosi, " We have to pass it to avoid finding out what's in it. "

Secret funding via this procedure is unconstitutional and illegitimate. Yet neither the president, the judiciary, nor anyone in Congress appears able to stop it. The IC is a fourth-stage cancer devouring the guts of the former republic.

Josh Stern , February 20, 2017 at 4:59 pm

Secret funding is a huge unknown. Everything from mostly legitimate front companies, to business donations for favors, to drug running. One would think, incorrectly, that the drug running is some kind of big secret the following links show it is not:
Collection of quotes from DEA agents, John Kerry, etc:
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=5878115
Video with Robert Bonner, ex-head of DEA, on 60 minutes in 1993, just after he stepped down:
https://www.youtube.com/watch?v=lx1bL_Gp03g

Persona au gratin , February 20, 2017 at 5:37 pm

YES!

Crazy Horse , February 20, 2017 at 7:42 pm

50 billion? That is just the cost of coffee and donuts. A week before 911 Rumsfeld acknowledged that 2.3 TRILLION dollars was missing and unaccounted for in the DOD budget.

" CBS News Correspondent Vince Gonzales reports, while its own auditors admit the military cannot account for 25 percent of what it spends.
"According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted.
$2.3 trillion - that's $8,000 for every man, woman and child in America. To understand how the Pentagon can lose track of trillions, consider the case of one military accountant who tried to find out what happened to a mere $300 million.
"We know it's gone. But we don't know what they spent it on," said Jim Minnery, Defense Finance and Accounting Service.

http://www.cbsnews.com/news/the-war-on-waste/
https://www.youtube.com/watch?v=xU4GdHLUHwU

Conveniently the accounting records that might have made possible an investigation of that little error were located in Building 7 of the WTC and in the exact section of the Pentagon which the skilled Saudi pilots targeted and and then vaporized their airliner leaving only a few token pieces on the lawn.Of course 911 is ancient history that nobody cares about anymore. Apparently we are in need of another accounting cleansing, since the Inspector General reports that an additional 6.5 TRILLLION has gone missing since then.

http://www.newstarget.com/2016-08-18-how-did-the-pentagon-lose-over-6-5-trillion-in-taxpayer-money.html

JTMcPhee , February 20, 2017 at 8:46 pm

What, me worry? those are all MMT dollars, after all plenty more where that came from.

ex-PFC Chuck , February 20, 2017 at 9:19 pm

Susan Lindauer, in her memoir of her role as a CIA asset serving as a go-between in the failed negotiations to avert the Iraq War ( Extreme Prejudice: The Terrifying Story of the Patriot Act and the Cover Ups of 9/11 and Iraq ), recounts that in the desperate last few weeks before March 20, 2003, she was paying her considerable expenses out-of-pocket. Her handler was having trouble getting her reimbursement approved, and by the time he did she was making a pest of herself about the fact that the negotiations had been deliberately sabotaged, and had become a pariah. At that point the handler had no difficulty, not to mention compunction, about simply stiffing her and diverting the funds to the McMansion he was building.

How much of that $50B black budget is similarly diverted?

Elasmo Branch , February 20, 2017 at 4:28 pm

"Covert" means the activity is against the law. "Clandestine" means the activity is secret but within the confines of the law. The military undertakes clandestine activity authorized by law, not covert activity. A US soldiers cannot break the law. On the other hand paramilitary activity is often covert.

For example, a US soldier on a clandestine mission is captured. Since the soldier is acting legally, albeit in secret, he is afforded all of the rights as a prisoner of war if he id's himself as a US soldier in uniform, name, rank, serial number. A CIA agent [likely a contractor and not a gov't employee] is captured on a covert mission, he can be summarily executed, legally, on the spot for a number of reasons: conducting warfare in civilian clothes and not in uniform, espionage, piracy, etc. There is grey area, for instance, if soldiers ingress to an area in civilian clothes [or the enemy's uniform] then put on their own uniforms before conducting an attack, as the SS did in the Ardenne.

Josh Stern , February 20, 2017 at 4:54 pm

This article: Joseph Berger III. "Covert Action – Title 10, Title 50, and the Chain of Command." Joint Force Quarterly 67 (Q4 2012). http://ndupress.ndu.edu/Portals/68/Documents/jfq/jfq-67/JFQ-67_32-39_Berger.pdf . is exactly on this topic. I take my definitions from there. The article does note that it takes some doing to resolve the different usages within CIA and DOD.

DH , February 20, 2017 at 8:10 pm

Sounds like the Koch Brothers network.

SerenityNow , February 20, 2017 at 2:52 pm

It seems to me that the Canadian "poet, academic and diplomat" author Peter Dale Scott should be included in any mention of "Deep State" Activities.

Here is an excerpt from his well foot-noted book:

"The American Deep State: Wall Street, Big Oil and the Attack on U.S. Democracy"

He has many more interesting excerpts and articles on the same site :

Lambert Strether Post author , February 20, 2017 at 4:04 pm

I bought, read, and reviewed one of Scott's books; link in the first para .

NotSoSure , February 20, 2017 at 2:58 pm

Don't forget the final property of Deep State: "No objections to Goldman Sachs". At least in that one they see eye to eye with Trump.

ebr , February 20, 2017 at 3:12 pm

No Illuminati ? - but I jest.

It would be good if we could separate 'what is the deep state' and 'what are the factions of the deep state' and 'who belongs to the deep state' I suspect that Cambridge Analytics & their Facebook scraping could answer the question 'who belongs to the deep state' as they could they easier track a social network of people more loyal to each other than to the US Gov or the POTUS of the day. Asking the 'Deep State' to define itself could be an exercise in futility as members of the 'Deep State' likely mix ideology & the opportunity to make money in ways that blind them to the full implications of their actions.
Slate magazine today had an article up of a doctor who tried the revolving door and then wrote about it
http://www.slate.com/articles/health_and_science/medical_examiner/2017/02/going_undercover_through_washington_s_revolving_door.html
If you all need a fun book to read, try Interface by Neal Stephenson (written after Snow Crash and before Cryptonomicon)

UserFriendly , February 20, 2017 at 7:19 pm

IMO: Deep State: Anyone who will be in DC regardless of who is president and can still have some degree of power. They are sometimes well known people like Neera Tanden and sometimes they work in the IC. They are the people who no matter how many times they fuck up, destroy lives, lose a campaign, or completely fail at whatever task they are given, they can always count on a nice cushy paycheck and a new gig where they can [Family Blog} it up some more. The entire class of DC insiders who just can't fail down no matter what.

Carla , February 20, 2017 at 3:15 pm

A couple more books of interest: "National Security and Double Government" by Michael J Glennon (2014) and "The Deep State" by Mike Lofgren (2016).

ewmayer , February 20, 2017 at 6:33 pm

A PDF version of Glennon's book is freely available online at the Harvard National Security Journal website.

REDPILLED , February 20, 2017 at 3:16 pm

DEEP STATE READING LIST:

The Devil's Chessboard: Allen Dulles, the CIA, and the Rise of America's Secret Government by David Talbot

The American Deep State: Wall Street, Big Oil, and the attack on U.S. Democracy by Peter Dale Scott

The Deep State: The Fall of the Constitution and the Rise of a Shadow Government by Mike Lofgren

Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World by Tom Engelhardt and Glenn Greenwald

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer

Manufacturing Consent: The Political Economy of the Mass Media by Edward S. Herman and Noam Chomsky

The New Media Monopoly: A Completely Revised and Updated Edition With Seven New Chapters by Ben H. Bagdikian

They Rule: The 1% VS. Democracy by Paul Street

NATO's Secret Armies: Operation GLADIO and Terrorism in Western Europe (Contemporary Security Studies) by Daniele Ganser

An Act of State: The Execution of Martin Luther King (Updated Edition) by William F. Pepper

The True Story of the Bilderberg Group by Daniel Estulin

JFK and the Unspeakable: Why He Died and Why It Matters by James W. Douglass

9/11 Ten Years Later: When State Crimes Against Democracy Succeed by David Ray Griffin (2011)

JFK: The CIA, Vietnam, and the Plot to Assassinate John F. Kennedy by Fletcher L. Prouty (2011)

The Secret Team: The CIA and Its Allies in Control of the United States and the World by Fletcher L. Prouty (2011)

Mounting Evidence: Why We Need A New Investigation Into 9/11 by Paul W. Rea (2011)

The War Conspiracy: JFK, 9/11, and the Deep Politics of War by Peter Dale Scott (2013)

JFK-9/11: 50 Years of Deep State by Laurent Guyenot (2014)

All the Presidents' Bankers: The Hidden Alliances That Drive American Power by Nomi Prins (2014)

The Orwellian Empire by Gilbert Mercier (2015)

The Hidden Structure of Violence: Who Benefits from Global Violence and War
by Marc Pilisuk (2015)

Base Nation: How U.S. Military Bases Abroad Harm America and the World (American Empire Project) by David Vine (2015)

The New Confessions of an Economic Hit Man by John Perkins (2016)

The End of the Republic and the Delusion of Empire by James Petras (2016)

Two web sites:

Architects and Engineers for 9/11 Truth: http://www.ae911truth.org/

Patriots Question 9/11 – Responsible Criticism of the 9/11 Commission Report: http://patriotsquestion911.com/

Jim Haygood , February 20, 2017 at 4:03 pm

Excellent list.

Don't forget the late, great Chalmers Johnson, who coined the term blowback and left us with guides such as The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic.

Lambert Strether Post author , February 20, 2017 at 4:05 pm

Chalmers Johnson is great.

Emma , February 20, 2017 at 6:17 pm

Another suggestion for your list of additional reading material:
https://wikispooks.com/wiki/Document:Democratic_State_v_Deep_State
It's a document/paper by Ola Tunander ( https://en.wikipedia.org/wiki/Ola_Tunander ) who is quite familiar with the topic (see his experience/research of US/UK PSYOPs naval activities in Scandinavian waters ..).

Ulysses , February 21, 2017 at 9:21 am

Good book!!

dbk , February 20, 2017 at 4:32 pm

Yes, thanks for that list, much appreciated.

As long as we're on the subject, more or less, I have a question about Dark Money (I'm reading Mayer's book these days) and the Deep State: Do they overlap, or are they rivals? Or are their goals sometimes in sync and sometimes at odds with one another?

Another way of posing this question is this: If we assume that the President is not the preference of the Deep State, are we also to assume he was not the preference of Dark Money?

I'm having a hard time figuring out who's going after whom these days, and what short- and long-term objectives are being fought out, almost – but not quite – before our eyes.

Here's a case from a different field, education, which is the one I follow most closely. A blogger has recently identified the "blueprint" for the new Sec of Education to follow, laid out in a planning document by a Dark Money group which is below the radar (well, below my radar, anyway). It's pretty clear that the Sec is their cabinet member, but are there others? Were these appointments made in the form of favors called in? For what, though, if the Pres isn't part of this network?

The Sec of Education, it emerged in the course of contentious hearings, had contributed to no less than 23 Republican Senators' campaign war chests. What are we to conclude about them?

Anyway, here's the link to the post (link to the actual document through it – it was removed from the organization's own site, so is no longer available there):
http://www.eclectablog.com/2017/02/chilling-this-is-why-weve-been-trying-to-warn-the-usa-about-betsy-devos-destroying-the-wall-between-church-state.html

Josh Stern , February 20, 2017 at 5:12 pm

Another good book to mention, which plays a different role, is "Legacy of Ashes" by Tim Weiner. It covers a lot of CIA dirt – coups, assassinations, defying/lying to Presidents, etc. – but it is different because basically all of it is drawn from the CIA's own files. So it is purely historical and outside of any "conspiracy" controversy. The files are not complete. Richard Helms ordered the most incriminating ones destroyed in a giant purge in the early '70s – this is described in the book too. But what is there and was saved is often pretty dirty.

Scott Noble's film series is entertaining on free video: http://metanoia-films.org/counter-intelligence/

Persona au gratin , February 20, 2017 at 6:11 pm

To add: Family of Secrets : The Bush Dynasty, America's Invisible Government, and the Hidden History of the Last Fifty Years, by Russ Baker (2010).

JCC , February 20, 2017 at 9:15 pm

Definitely a good list. I've read a few of these books and want to read more on the list. And don't forget any of Sheldon Wolin's recent books and essays. This one is 13 to 14 years old and still appropriate – https://www.thenation.com/article/inverted-totalitarianism/

He points out the basic structure, I think, in which following the money makes the most sense.

neo-realist , February 20, 2017 at 9:38 pm

Pepper's last book on the MLK assassination, The Plot to Kill King: The Truth behind the Assassination of Martin Luther King would also be a worthy addition to the list.

Excellent discussion about it on this podcast.

https://kpfa.org/episode/guns-and-butter-june-29-2016/

ex-PFC Chuck , February 20, 2017 at 9:56 pm

I second your recommendation of Pepper's book.

Kim Kaufman , February 20, 2017 at 10:05 pm

Imo, a must read: Operation Gladio: The Unholy Alliance Between the Vatican, the CIA and the Mafia by Paul Williams. I think it's newer than most of the books above and connects a lot of dots.

peter , February 21, 2017 at 6:24 am

I've always throught that 'Manufacturing Consent: The Political Economy of the Mass Media by Edward S. Herman and Noam Chomsky' should be mandatory on high school curriculum as a speed course on intellectual self-defense.

nobody , February 21, 2017 at 9:42 am

Another for the list:

Conjuring Hitler: How Britain and America Made the Third Reich , by Guido Giacomo Preparata

nobody , February 21, 2017 at 10:24 am

Three essays by Charles Hollander: "Pynchon's Inferno," "Pynchon's Politics: The Presence of an Absence," and "Pynchon, JFK and the CIA: Magic Eye Views of The Crying of Lot 49."

PlutoniumKun , February 20, 2017 at 3:25 pm

I would put it simpler and define a 'Deep State' as a major (i.e. not minority rogue) element within the existing government structures (or quasi-government structures) which is willing to commit serious illegal acts or unauthorised acts of violence within the territory of the State to achieve its aims independent of the legally constituted government. In other words, I'd not define it by its structure or nature, but by what it actually does.

I'd define it this way to distinguish it from the sort of bureaucratic plotting which takes place within any large institution which finds itself led by someone who doesn't buy into the organisations core consensus. An example I would use would be Operation Gladio . If Operation Gladio had simply operated as designed, as a secretive military operation which government leaders may not have been aware of, then it was not an example of Deep State. But if, as alleged (but never proved), it carried out acts of terrorism and false flag operations with the specific aim of forcing elected governments to do what they didn't want to do, and this was part of a deliberate high level strategy (i.e. not just the act of a rogue element), then it would be an example of the Deep State at work within democratic western governments.

Put into contemporary terms, if the internal resistance to Trump takes the form of leaks, internal manoeuvres to slow down his agenda, etc., then that is 'normal' bureaucratic operations. If it takes the form of blackmail, false flag terrorist attacks, assassinations, etc., then it is the Deep State in operation.

Given that we know parts of the US and allied intelligence communities have for decades been involved in highly illegal operations around the world which has included torture, murder, blackmail and high level assassinations, is it really so far fetched that there is an element willing to do the same thing within the US?

Greg Taylor , February 20, 2017 at 4:18 pm

Defining "Deep State" by its actions is appealing. Would the military veto of Kerry-negotiated ceasefire in Syria count? Some officers acted without apparent authority and were not reprimanded as a result. Would this have transpired "within the territory of the State" and, thus, meet this definition? Should it?

PlutoniumKun , February 21, 2017 at 3:34 am

Thats an interesting question. There can be a fine line between bureaucratic infighting and actual illegal and anti-democratic actions. On my definition I would say 'no', its not Deep State in that the actions were insubordinate and dangerous, but they took place outside the US so arguably were more the result of a power struggle between government factions. It was the result I think of Obama's weakness as a leader, not an actual Deep State action.

Quentin , February 20, 2017 at 3:32 pm

Wouldn't any so-called Deep State be supported by factions in Congress? Sure. For instance, John McCain is in my view the epitome of the Deep State, one of its chief representatives, out in the open, a vanguard. The Clintons too, doubtless, though now outside government. If Congress gives no pushback, it bestows tacit/active agreement. Congress can rescind the privileges and power of all the organisations observers ascribe to the Deep State. So what's so mysterious? The notion of a Deep State's existence might just serve as a way to avoid responsibility, accountability, deny agency. Some shadowy bunch is running things, anything else new? On the other hand think tanks, contractors and subcontracters are less easily kept in place. Yet Congress can put an end to prisons for profit and erase one element of the deception, reduce the numbers if security clearances by defunding, etc. not things were are about to do. Eminence grise, one two buckle my shoe

sgt_doom , February 20, 2017 at 4:13 pm

McCain is too stupid. To better understand the Deep State, one must go a bit higher up the ladder.

Look into the membership of the Bretton Woods Committee - the lobbyist group for the international super-rich (www.brettonwoods.org), and the Group of Thirty (www.group30.org).

Once you understand these two groups, you'll be more aware.

Persona au gratin , February 20, 2017 at 6:05 pm

Loved the Group of Thirty pictorials on their home page. I counted exactly one genuine person of color (aka, "token negro") among the melange, with a handful of "half and halfs" of former British colonial heritage who of course have had time to assimilate and duly "see the light" as to the wisdom of continued perpetual white northern European supremacy. As for the few token Asians, they'll come around soon enough as well, although they ARE amazing students, aren't they?

Kim Kaufman , February 20, 2017 at 10:06 pm

Politicians are the puppets not the puppetmasters.

Steve H. , February 20, 2017 at 3:47 pm

We can avoid definite articles, but this is a defining article, and could become the definitive article.

The most curious fact is that the phrase is showing up in the msm. I take it as confirmation of Lambert's point: 'Factional conflict within the deep state exists!'

roger gathmann , February 20, 2017 at 4:11 pm

I always attributed the use of the word to Peter Dale Scott. The Turkish phrase seems to me more of a parallel usage than the place from which the phrase is derived. In my cursory reading, the phrase originated in conspiracy theory – particularly around the assassination of JFK. I am not using conspiracy theory in a disparaging sense, since I don't think a belief in conspiracies (which is legally recognized, and was long one of the great themes of political science, from Aristotle to Montesquieu) is per se disqualifying. Scott, in the preface to Deep Politics and the Death of JFK, has a good take on the prototype of the Deep State – in his theory, there is always a deep political practice that is unacknowledged officially. For instance, Tammany New York of the late 19th century operated, on the surface, according to the legal order with a mayor and a bureaucracy, etc., but in practice, it was run by an elaborate system of kickbacks and the investment of certain private players with enormous governmental power. The Deep State, under this p.o.v., shouldn't be confused with bureaucrats and those invested with public power, but instead, is a collaboration between such bureaucrats and those in private positions who retain unacknowledged public power. To quote Scott: " A deep political system or process is one which habitually resorts to decision making and enforcement procedures outside as well as inside those publicly sanctioned by law and society." By this definition, the endorsement of Trump by the National Border Patrol Council and the way in which, under Obama, certain Border Patrol officials sought to impede or change processes for taking in and giving due process to refugees are evidences of a deep political process.

Cat's paw , February 20, 2017 at 5:33 pm

Well, Scott's Deep Politics is published in 93. The Turkish term Deep State appears in print around 96 (maybe as late as 98–I'd have to look around for a cite). While the terms are relatively synonymous they are by no means equal. Best I can tell, Scott's starts using the word Deep State widely in the mid-2000's.

Additionally, as I've come to understand it the term did not originate in conspiracy theory. Rather the term was picked up by conspiracy theorists from Turkish journalism as a useful shorthand for the alleged (and hidden) events and actors they were trying to describe. Personally, not that it matters, I think it's important to keep the original usage/meaning in mind. 1. b/c it was coined to describe a real yet inexplicable event–not speculation or a theory of some conspiracy: i.e., the JFK assassination. Wherein agents of military, representative government, and criminality (along with a "bimbo" straight out of central casting) who have no legitimate business doing business were obviously doing business–but what kind of business? Who knows, that's why it's Deep. 2. The term itself can easily drift into being an amorphous, ill-defined, but overdetermined and overly unified signifier on the order of "cabal" which is likely to happen anyway now that its wound its way into common parlance.

I may just be quibbling, but I don't see deep political processes like Tammany or Border Patrol shenanigans as being of the same phenomena as the so-called Deep State. Deep State would usually imply elements of the military or, more especially, elements of the security apparatus (public and private) at times coordinating with, at other times interfering with, known political/institutional actors, corporate power, and criminal concerns that might involve money laundering or drug and human trafficking. As most here are noting, it is factional and adversarial–a network of several or many discreet entities that coordinate, align, and conflict according to shifting interests. It's paralegal, parapolitical, paraeconomic (or paramarket), and parainstitutional.

And all of that to say that such a definition is wholly contingent upon there being empirical and on-going phenomena which corresponds approximately to the term itself.

Yves Smith , February 20, 2017 at 7:58 pm

Lambert debunked Scott's sloppy and internally inconsistent analysis, per the link he provided at the very top of the post. That's why he kept arguing against its use.

DonCoyote , February 20, 2017 at 4:13 pm

Thanks Lambert. Here's a bit more grist for this particular mill/passages from the rabbit hole (depending on what set of metaphors you like)

1) Paranoia , a tabletop RPG game from the 80's. "The game's main setting is an immense, futuristic city called Alpha Complex. Alpha Complex is controlled by The Computer, a civil service AI construct The Computer employs Troubleshooters, whose job is to go out, find trouble, and shoot it. Player characters are usually Troubleshooters The player characters frequently receive mission instructions from the Computer that are incomprehensible, self-contradictory, or obviously fatal if adhered to, and side-missions (such as Mandatory Bonus Duties) that conflict with the main mission each player character is generally an unregistered mutant and a secret society member (which are both termination offenses in Alpha Complex), and has a hidden agenda separate from the group's goals, often involving stealing from or killing teammates."

So: big on non-monolithic, also big on double/triple identities (troubleshooter/mutant/secret society), which we associate with the intelligence agencies, but also with revolving door politicians/lobbyists.

2) The "incomprehensible/self-contradictory/conflict with the main mission" made me think of seven/eleven/twelve (depending on scholarship/personal preference) chess, most recently attributed to BHO–that is, actions who on the surface don't seem to make sense given the situation, but which conspiracy theorists/true believers think are actually directed at a future/buried/hidden/alternative problem. Although this would seem to fit better with at least a semi-monolithic Deep Society, because it is strategy, and a non-monolithic Deep Society would presumably be less organized/more tactically inclined.

3) The Final Reflection , and especially the Klingon "equivalent" of chess, klin zha , and it's reflective version. Reflective klin zha is played with only one set of pieces. "The Reflective is not so much a variation but a strategic approach to an otherwise tactical game Once set up, the first to place is also the first to move. During each turn, the player chooses one piece, making all others the enemy. The player who captures the Goal on his turn is the victor." So I kill a piece protecting (next to) the goal, but on your turn you now control that piece, use it to capture the goal, and beat me.

So: a smaller (but still non-monolithic) Deep State, with a large unitary set of "pieces" (the non-Deep State?). Again, while there are two sides playing, they are both using the same pieces to try to do the same thing, and they only have "control of the board" some of the time.

So my takeaways: non-monolithic (and especially more than two sides), partial control (whether because of multiple/hidden identities or non-monolithic is unknown), and given the pathetic state of most of our media, most motives are "hidden", at least from casual view (cf for the media's "hidden" motives in today's links

sgt_doom , February 20, 2017 at 4:14 pm

Globalists against (non-deep state capitalists) economic nationalists?

susan the other , February 20, 2017 at 4:26 pm

Here's a reminder (from NC a while back). It is a waste of time to deliberate over the existence of the deep state. What's important is participating in a state – a society – that is well run; where inequality is always exposed; where propaganda is always obvious. It's impossible to define "the deep state." I think Lambert was right when he said the definition of the deep state always turned out to be a big hairball.

hemeantwell , February 20, 2017 at 8:15 pm

I agree with the spirit of what you're saying, but try this: I think that factional conflict, occurring during periods of systemic strain/crisis, is what leads otherwise contented and inertial sections of the state to act in ways that require concealment, either of actor or action. Reading a bit from the Glennon book linked above, wherein he makes much of Bagehot, reminded me of how the French political system used to be described as having something like a bureaucratic ballast keeping the ship of state from capsizing. That sort of conservative, continuity-maintaining function can grow claws, and that's what we're seeing now, particularly when US elites are trying to cobble a revised foreign/imperial policy to deal with China and Russia and the president is having trouble intoning the verities of US exceptionalism.

barrisj , February 20, 2017 at 4:41 pm

Well, that lengthy disquisition seems to indeed "validate" – as it were – the "deep state" terminology if not its epistemological derivation(s) at the very least, readers keeping to the various formulae offered for "correct usage" won't be whacked upside their haids by the moderators if the term appears in a comment.
Cheers.

Michael , February 20, 2017 at 4:43 pm

My first encounter with the idea of the Deep State was from Mike Lofgren's 2014 essay, "Anatomy of the Deep State", based upon his 25 year career as a Capitol Hill staffer. Here is the link:

http://billmoyers.com/2014/02/21/anatomy-of-the-deep-state/

JTMcPhee , February 20, 2017 at 4:44 pm

Maybe worth a footnote or something? Is Charlie Wilson "deep state" in any way? https://en.wikipedia.org/wiki/Charlie_Wilson_(Texas_politician) And his apparently occasional bed partner, Joanne Herring? https://en.wikipedia.org/wiki/Joanne_Herring

How about those little quiet gatherings of the Koch-convened sort, that attract so little "press" attention, at Palm Springs and etcetera? Is the "deep state" limited to Great Game and globalism, or is the long steady erosion of even the myth of "democracy" and the transformation of that word into its opposite, via the efforts of all those very small number of people who profit from killing public education and regulatory capture and ascension to elected positions in everything from little town councils and school boards to state legislatures and statehouses, constitute part of what might qualify as some sort of "deep state?" ALEC is not on everyone's tongue, after all, but the power the people in it exert, through long application, sure forks over a whole lot of what maybe most people would think of as "the general welfare" and "public goods." IS Davos "over?" Is Bilderburg?

Interesting how many of what would seem to me to be deep-staters are tied to Afghanistan, and of course Israel. One might even posit the Israelites have their own deep state, that has interlocking membership with players and factions and elements of the unelected and maybe public but mostly invisible thing that the phrase calls up in the minds of many of us.

Having named the demon, if there is ever any agreement on a name and frame, does that give us mopes any power over the demon, or just another opening for its immanence in our sad little lives?

integer , February 20, 2017 at 10:49 pm

The first step would seem to be forcing the demon out from the shadows and into the sunlight so everyone can get a good look at it. I imagine it will then lash out with everything it has like a cornered animal, which will harden public opinion against it, and then it will be game on for real. A very dangerous game, to be sure, but what is the alternative?

Horsewithnoname , February 20, 2017 at 5:04 pm

From http://www.oftwominds.com/blogfeb14/dollar-deep-state2-14.html [Charles Hugh Smith, 02/2014]
I have been studying the Deep State for 40 years, before it had gained the nifty name "deep state." What others describe as the Deep State I term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power–military, diplomatic, intelligence, finance, commercial, energy, media, higher education–in a system of global domination and influence.

Back in 2007 I drew a simplified chart of the Imperial structure, what I called the Elite Maintaining and Extending Global Dominance (EMEGD):

stockbrokher , February 20, 2017 at 5:14 pm

1. "Example: "The Iraq WMD's yellowcake uranium episode was a Deep State Blooper." (See here for details; the yellowcake uranium was part of the Bush administration's WMD propaganda operation to foment the Iraq War.)"

How is this an example of a blooper? It helped to achieve its intended goal. That it was exposed much later as a fabrication didn't vitiate its effect.

2. Surprised so many examples/references (especially here) but none with Wall Street as a primary Deep State actor. Read something revelatory ( to me, anyway) recently re the CIA ( post WWII) being engineered mostly by Wall Street for the sole purpose of protecting big U.S Corporate interests. Sorry no time to dig it up, but I'm sure others more knowledgeable can expound. (As SerenityNow notes, Scott's book puts WS in the title.)

Skip Intro , February 21, 2017 at 10:23 am

Good points.
What is interesting to me is the similarity of the modus operandi revealed in the yellowcake episode, where privileged information was 'leaked' to a tame 'journalist' to take out an enemy. In the case of the yellowcake, we generally accept the narrative that blowing Joe Wilson's wife's Non-Official Cover, but as part of a non-proliferation team, Valerie Plame was also in a position to directly interfere with WMD claims from the administration. OTOH, the WHIG and OVP are not very deep.
In addition, it is easy to point to the Iraq debacle as a failure on the part of the 'deep state' that contrived it, but a more cynical view would consider that a quick victory is less profitable than a slow defeat. In that light, apparently glaring errors, like the disbanding of the Iraqi Army, may be understood to be insurance that has paid off with a successful insurgency, a weakened state where oil can be bought or taken without any pesky national government interference, and eventually, trained military leaders for IS, the next-gen enemy with actual ground troops and conquered territory.

I was surprised that there wasn't a reference to Ike's warning about the Military Industrial Complex, which seems like the original American reference to an extra-democratic coalition of interests that could influence or control policy.
Another milestone would be the Iran-Contra affair, where we heard North and Poindexter drooling over an 'off the shelf operational capacity' to circumvent constitutional control of foreign policy (a market niche now filled by Erik Prince and Blackwater/Xe/Academi). In connection with this scheme, we also witnessed intelligence officials colluding with arms merchants to influence a US election by arming enemies, as well as running drugs into the US to fund said independent foreign policy. I think the illegality is well established, as for killings within the US territory, we can ask Orlando Letelier.

scraping_by , February 20, 2017 at 6:10 pm

Ran into an interesting passage in Kevin Phillips's 1994 book Arrogant Capital: Washington, Wall Street, and the Frustration of American Politics . He speaks of an 'iron triangle' of politics, interest groups, and media that turns aside the cyclic outsider revolutions that would otherwise renew American political institutions. If Trump has this view of his populism, it makes sense he spends so much time disparaging the MSM; not just a celebrity feud, not just annoyance about bitchiness, but a reasoned effort to break an elite power tool.

If Phillips's iron triangle fits the description of a Deep State, and it can, this may be an actual conflict over principles and convictions. Because the elite believe deeply in their own position, and are convinced they're doing God's work.

PhilM , February 20, 2017 at 6:10 pm

To me this is the kind of synthetic journalism that really sifts meaning from noise. And uniquely, on this site, the reading lists and comments are sophisticated and thoughtful additions and refinements, like the peer review offered from any scholarly community. This article is not definitive; but it could grow and grow, and then one could easily call it "seminal." This is work that I happily pay for.

From the history of the 1930s: one notes that for Heydrich to consolidate his bosses' power over Germany, he felt it necessary to "declare war" on the existing German civil service in 1935–not just the police force, but the entire bureaucracy; and to seize control of the foreign intelligence services as well as the domestic. The only successful hold-out was the Abwehr, the military intelligence service, which succeeded in preserving its independence in a very much more closely circumscribed field.

So Heydrich definitely felt there was a "state within the state" that needed to be co-opted and ideologically purified and above all surveilled, before Hitler's power was secured. That, in my humble view, is what the "deep state" is. It's the most important part of the question "quis custodiet custodes ipsos," and why Plato had a philosopher king instead of just a bunch Guardians, and why a nobility requires a monarchy.

integer , February 20, 2017 at 10:42 pm

Yes it's great to see this issue being given the attention it deserves and being subjected to serious analysis by NC and the commentariat. Thanks Lambert!

witters , February 21, 2017 at 2:22 am

A philosopher king who was poor, lived on public provision, owned no property, had no family, and lived in accomodation from whom none could be forbidden. And so just & virtuous.

Gman , February 20, 2017 at 6:15 pm

Only relatively recently having become aware of the term, 'deep state' I would assume, in its most basic form, it refers to those mostly 'unseen' and 'unknown' conservative we know best types who wield uninterrupted, often disproportionate influence without having to suffer the dreadful inconvenience or potential indignity of seeking a periodic democratic mandate.

Watt4Bob , February 20, 2017 at 6:29 pm

It seems to me that there was a lot of talk about the birth of the DHS being the biggest reorganization of the federal government since the New Deal.

That talk included concerns that Bush was putting thousands of dead-enders in bureaucratic positions, and that they would be impossible to remove in the future.

From Occupy.com (May 2013);

But here's the strange thing: unlike the Pentagon, this monstrosity draws no attention whatsoever - even though, by our calculations, this country has spent a jaw-dropping $791 billion on "homeland security" since 9/11. To give you a sense of just how big that is, Washington spent an inflation-adjusted $500 billion on the entire New Deal.

We've been talking around here about the breaking of rice bowls and its affect on the credentialed class, the implication being the hysterical, unorganized revolt of people who feel their well-being threatened by the rise of Trump.

Bush II broke a lot of rice bowls when he leveraged the fearful post 9/11 environment to bring about the reorganization of the federal government under the DHS;

From Legislating Civil Service Reform:
The Homeland Security Act of 2002
; (emphasis mine)

The Administration presents their strategy as one that requires them
to have more control over federal personnel in order to provide national
security and protect America. For example, President Bush argued that he needed the freedom "to put the right people at the right place at the right
time to protect the American people."

The metaphor of physical placement-to "put" federal workers in particular places at particular times-is rationalized as a strategy to protect America,
much like one would move a Bishop or Knight in a chess game to protect
the King.

This physical placement metaphor was also picked up by the news
media. In one summary of the issues, an article in the Washington Post
noted, "The White House wants to retain the ability to remove
some employees from unions for national security reasons," and "Bush
wants the ability to move workers from one part of the department to
another to meet rapidly changing needs.

This metaphor of physical placement suggests that the Administration requires a particularly high degree of power and control over personnel,
but that degree of power is presented as rational and justified in light of national security.

To the extent that the audience is concerned about national security, then
they are invited to see the Administration strategy-in this case,
its need for power over personnel-as one that is consistent with that concern.

From the same paper, the other side of the argument ; (emphasis mine)

Union leaders saw this issue in a different light; they disputed the details of the proposal and also questioned the motives behind them.
Brian DeWyngaert, Assistant to the President of AFGE, saw the reforms
as an attempt by the administration to weaken the civil service system, to shift from "public administration" to "political administration."

DeWyngaert cites a paper, written by two former Republican personnel
management officials, that asserts, " The President can expect opposition
from official Washington's 'permanent government ,' a network that includes the career civil service, and its allies in Congress, the leaders of federal
unions, and the chiefs of managerial and professional associations
representing civil servants."

DeWyngaert expresses union distrust of the administration, arguing that
the real goal of the administration was to "control what agencies do
[ ] to change some of the personnel rules [ ] to the point where they are going to follow your line because you control their pay, their determination at will,
their layoff.

W4B;

What I'm pointing out, is that what we're calling the Deep State includes the "permanent government" mentioned above, and that in reorganizing the government under the control of the new DHS, the right, in the person of Bush II was attempting to replace a unionized, independent, New Deal flavored government bureaucracy with one that could be more easily controlled, because it was more politicized.

I'm saying that both the democratic, and the republican wings of the republican party have made peace with the notion of a more politicized "permanent government", and that more politicized "permanent government", is now showing its loyalty to the status quo by doing what's expected of it, joining the resistance.

PhilM , February 20, 2017 at 9:24 pm

This is exactly what I think, too, and what Heydrich recognized in 1935: that a large government has a hive mind. Without the SD ("Security Services"), the SS, and the Nazi Party organization, he could never have bent that hive mind, made of all those entrenched, entitled, relatively law-abiding functionaries, to his will.

Trump has none of those tools at his disposal, so there's no reason to expect his lasting very long or getting much done.

That's what makes the hysteria about his being like Hitler so very misplaced. If Trump had an organization like the Nazi party hundreds of thousands strong, ready to die in the streets for him, with operatives ready to put into place to take over the management of the government effectively at all upper levels, it would be another matter. As it is, he's grasping at straws from other talent pools. No wonder the bookies are giving him lower odds.

schultzzz , February 20, 2017 at 6:48 pm

Chris Hedges, on his RT show, recently defined it almost exclusively in terms of big business. I think the quote was something very short like, "It's Raytheon, Goldman, and Exxon!!!"

Which complicates things, as Trump's cabinet has reps from Goldman and Exxon in it.

neo-realist , February 20, 2017 at 10:36 pm

On that tip more or less, I recall watching a video of Dick Gregory and Mark Lane talking about the MLK Assassination, and Gregory made a point of saying more or less that the intelligence apparatus doesn't act unilaterally, but that it acts at the direction of the aristocrats, i.e., oligarchs, big business, etc. The aristocrats tells the apparatus to go after those governments and politicians that are acting against their interests.

In a documentary called King–Montgomery to Memphis (GREAT DOCUMENTARY), Harry Belafonte said that when King antagonized the "money power" , he was pretty much marked for death.

Anonymous , February 20, 2017 at 6:52 pm

Anecdotally, I was working with a former Senator at the time of the DHS formation who was still highly involved with the Bush administration. in fact Cheney had them on speed dial. I can tell you flat out that despite spouting the same garbage about freedom to reorganize on the fly, if you talked with them long enough the ability to fire employees at will ALWAYS ended up being the reason when anyone pinned him down about how departments would be reorganized on the fly. Very clearly it was about making sure that employees would know that they should show no integrity at all in doing their job most particularly in regards to either upholding the Constitution or recognizing the legal rights of any person, citizen of America or not.

Dave in Austin , February 20, 2017 at 7:16 pm

Deep state versus deep government

All modern states are bureaucratic. So the surface state which the public can replace, what we usually call "the government", is underpinned by a deep and essentially invisible substrate of people and institutions. The characteristics of the deep government are 1) opaque bureaucratic decision-making and written output designed to mislead not inform, 2) invisibility because the press cant easily turn the story into a narrative with individuals who represent good and evil, and because the national press (NYT, WP, and even the WSJ) no longer reports the news but filters the policies to either spark outrage or encourage cooperation, 3) The deep government employees are smart, educated and have come up through the ranks (think Bob Gates). They are great people, fun to be with but often incredibly insular and sure that "You people out there don't understand". And they are often right about that. Don't underestimate their knowledge.

Under most conditions the surface government, the deep government and the parts of the deep state outside the government (ie the press) are in general agreement and work together smoothly. Today the surface state (President, congress and soon probably the courts) are trying to bring about change that the individuals within the deep government fundamentally disagrees with on issues like immigration, national self-sufficiency and overseas threats. All major changes (our entry into WWI and WWII, the civil rights movement, tax and subsidy law, Obama's immigration program) generate resistance. Sometimes I agree with the deep, sneaky part of the government (entering WWII); other times, I don't (Vietnam, Bush in Iraq, Obama's immigration policy).

Our deep state is like that of most democracies and differs from authoritarian deep states in a number of fundamental ways: 1) our military is adamantly apolitical. All officers take an oath of allegiance to the Constitution, not the government (in the late 1960s, as the military got sucked into domestic policing, many senior officers started reading and discussing the Constitution among themselves), 2) No U.S. deep state emerged out of our two formative struggles, the revolution and the Civil War . Much of the world (China, Russia and the colonies that became free in the 1950s and 60s) had a different history, 3) We have no ethnic and religious deep states- no Moslem Brotherhood, no Burmese Buddhist nationalist, although we do have passionate ethnic groups that prefer to operate out-of-sight (Jewish, Irish Catholic, Cuban, Indian to name a few) . 4) Countries that fight overseas wars or that fear internal revolutions all develop a deep state. All the ex-colonies that didn't (Iraq, Egypt, Guatemala and a hundred more) had the weak state overthrown and replaced with a strong and deep state. In the US the first deep state hints came after WWI (not WWII) with large caches of unappropriated money going into the hands of Naval Intelligence (who do you think paid for the Flying Tigers?). The original sin of our liberal deep state was the campaign to get us into WWII. A good cause- and a terrible precedent.

Finally, the deep government and the national elite are not the same. The deep government is largely a meritocracy filled with alert people who know which way the wind is blowing. If real Communists or real Fascists took over they would either stay inside, keep getting paid, and quietly try to undermine the new leaders or they would take early retirement. They don't write biographies or make statements because they are essentially private people immersed in their private lives, what the Communists used to call Careerists. The national elites are something else. They either feel independent (the hereditary rich, celebrities and Trump and the self-made billionaires) or are the insecure product of upper middle class families, Ivy League and second-level private colleges and good social backgrounds. They work in large institutions they don't own or control. The latter group wants to exercise power because it gives meaning to their otherwise uninteresting lives (think, academics, the non-profit sector and Federal judges). The self-made rich exercise power to become richer and because they love to control organizations that compete (Who owns all the NFL teams?). Both the deep state and the deep government are open to people of education, good breeding, ambition, discretion and good luck.

Is there any way to fix this? Probably not but nobody seems to bother the countries that don't do foreign adventures To roughly quote from the Bin Laden interview after 9/11, when he as asked "Why did you attack America?" he laughed and said "We didn't attack Switzerland". A better national press would help. If there are any billionaires out there interested in providing $100K salaries to real smart MBA students who like to dig, let me know. A few platoons of young I.F. Stones of various political hews might go a long way. But deep states are here to stay. The best we can do is monitor. analyze and publicize them.

Patricia , February 20, 2017 at 8:03 pm

What a fascinatingly bland presentation, revering deep state careerists for their solid private lives and good-breeding, while others are power-hungry insecure product searching for a cure to their dullness.

And calling for "platoons" of new IF Stones from among MBAs, of all places!

Thanks for the entertainment.

integer , February 20, 2017 at 10:31 pm

+1

Tomonthebeach , February 20, 2017 at 7:54 pm

As a retired member of the Deep State, I find it amusing at the imbecility of right- (or left) wing conspiracy nuts who can invent amazing chains of undermining collaboration across agency lines orchestrated by some powerful shadow demons.

If federal employees were really that effective, there would be no private sector wage gap, the VA and DOD would share a seamless electronic record system, and Snowden would have the Medal of Freedom, and HRC's fingerprints would have been all over the gun that killed Vince Foster.

The Deep State, if you want to call it that, exists so the people get the support and services they need despite confusing and often conflicting legislation, presidential directives, and agency regulations.

DH , February 20, 2017 at 8:27 pm

I generally apply Occam's Razor to conspiracy theories. It is generally more likely that events occur due to incompetence, lack of attention, or emotional reactions than conspiracy. To pull a secret conspiracy off successfully over a long time, you need to be really smart, really focused and not have many people, otherwise it is no longer secret.

The bigger the organization, the more likely you are to have a reversion to the mean of most of the population, and most people are more likely to turn a blind eye than participate in something that means they could lose their pension as well as getting home late for dinner.

So the biggest issue that Trump has with the bureaucracy is how to manage Parkinson's Law. He did in the private sector by running around saying "You're fired" but he can't do that to career civil servants. http://www.economist.com/node/14116121

I am sure that there are a bunch of bureaucrat top dogs that don't like the invasion of their turf. They are, after all, fundamentally political animals very jealous of their territory. Some of them might even talk to each other, but probably half of them despise the other half.

The biggest threat to us is that we slowly acquiesce to security theater that quietly gets more and more invasive. The police etc. are the most likely to be organized as some sort of "deep state" as some departments already have an us vs. them attitude.

JTMcPhee , February 20, 2017 at 8:43 pm

Tom, maybe one part of the bigger thing called "federal service" does that. I spent 13 years with the US EPA through the Reagan Revolution (and it was an amazing coup). A number of EPA employees, despite the threats of "RIFs" (reductions in force, or wholesale politically motivated firings), worked hard and quietly to do everything they could to slow the assault on "regulation" of sh!tty corporate behavior that threatened human health and the environment. There were a lot of go-alongs, usually later comers who were looking to get their resumes padded before moving to the dark side, but there were a lot who were serious in their commitment, and aware of their vulnerability, who continued to press for enforcement actions, regulations with teeth that required industries to spend money ("internalize") to install process changes and end-of-pipe-or-stack controls (which often resulted in increased profits for the corpos who had an excuse and tax deductions to update their plants. And there was continued insistence on doing the data gathering that supported the proofs of harm that pollution and toxics cause. There was an 'environmental justice" initiative despite the "f__k the poor" administration attitudes and policies, and a criminal enforcement operation that actually put corporate officers in jail and at least made them take notice of potential consequences. There are obviously still a lot of employees at EPA to take their mission to be protection of public health and the environment, preserving decades of data collection and soldiering on despite the "Mandate for Leadership" quackery and fear-and-loathing fomenting.

But your limiting the definition as you do is incomplete at best. The state security overlords, the oligokleptocracy, and the other inimical factions and parties that have been described in this post and comments, seem to me the real nuts and bolts of what 'deep state' is getting at. Not the many federal employees who, despite all the sh!t that flows down from above and laterally from the culture inside and outside the agencies, actually try to do the job of "positive governance," like a few people I have dealt with in the Social Security Admin, the VA, the CMS behemoth and a few others. I often wonder how people persist in those jobs and don't burn out or get fired. I was close to both while doing my thing at EPA, 1980-90 (the Reagan years - I had two-plus with Carter as president before that, to see how a less hostile-to-regulation-in-the-best-sense admin might operate.

Vatch , February 20, 2017 at 9:27 pm

Tom, I'm curious. In which department of the federal government were you employed?

integer , February 20, 2017 at 10:22 pm

Hard to take your comment seriously. Do you really think that the Deep State consists of federal employees who are concerned with VA and the rank and file of the DOD, or that they are interested in providing "support and services" to the people? I think it's likely that your belief that you were part of the Deep State is incorrect.

Mothy , February 20, 2017 at 8:01 pm

No discussion of the Deep State would be complete without reading "Spooks," by Jim Hougan. It was a seminal book written in 1980 (I believe) that introduced the notion of retiring IC operatives joining private company security apparati. Tell your compatriots you're acting on behalf of the government and a patriot will do ANYTHING. "The Conversation" was a depiction of one of the main characters in the book who had previously wiretapped most of Manhatten back in the early Sixties; he worked for either Hoffa or the Kennedy brothers or both. Really an unbelievable book getting more and more difficult to find. Ironically– or not– I believe it was Hougan's last piece of investigative journalism.

No Idea , February 20, 2017 at 9:14 pm

We cross out "conducting killings" for the American context (or do we?).

"Character assassination. What a wonderful idea. Ordinary assassination only works once, but this one works every day."
― Terry Pratchett, The Truth

Fool , February 20, 2017 at 10:02 pm

A succinct way that i like to think of the "deep state" is whoever the CIA works for.

Vatch , February 20, 2017 at 10:13 pm

"It's called the ruling class because it rules." –Arthur Silber

The rulers are the ones who rule. The ruling class includes non-rulers who are in the same socio-economic class as most of the people who rule.

buermann , February 21, 2017 at 12:48 am

I'd always assumed the concept originated with Peter Dale Scott, who, before he wrote the book "The American Deep State", used it all over the place in 2007's "The Road to 9/11". I've read neither but for excerpts, the concept merely referred to covert agencies acting outside the scope of democratic oversight - whether it's local police departments running out of control torture squads and black sites or national intelligence agencies acting as the private armies of the executive. That such groups might oust a sitting executive is of course the heart and soul of all his conspiracy mongering about the JFK assassination (I like his poetry an awful lot, but I remember trying to get through Cocaine Politics and either the sources didn't check out or they were untraceable, in any case I gave up on it).

https://books.google.com/books?id=op39ymd2um0C&printsec=frontcover&q=%22deep%20state%22

H. Alexander Ivey , February 21, 2017 at 1:18 am

If you want to find a consistent, broad, and useful meaning of a concept, and a phase or 'name' for that concept, look for books written on the subject. Postings, blogs, and even published articles do not have the authority that books have (it's not just because being hit upside the head with a book will hurt a lot more than with a blog posting, har,har).

My recommendation is Deep State, based on my understanding on Mike Lohgren's The Deep State: The Fall of the Constitution and the Rise of a Shadow Government .

I must say I personally don't like the term. When I use it with people who believe that Rep & Dem describe the US government, I get the old eye roll, tin foil hat outfitting treatment. Humm, maybe I'll lead in with the term 'Washington Consensus'. They get that one around here in Southeast Asia. They haven't forgotten or forgiven the IMF about the 1997 Asian financial crisis.

St Jacques , February 21, 2017 at 4:03 am

I hate the term deep state because, unlike the mic, for example, which has a clarity about it, it is so vague and malleable a term as to be almost useless except for Hollywood films and conspiracy nutters, but if there is such a thing, here is what it might look like:
https://www.youtube.com/watch?v=B8IvKx0c19w

Damson , February 21, 2017 at 6:56 am

It goes back to 9/11.

A must-read is the 'Collateral Damage' investigation in which the Office Of Naval Intelligence features as the main exposing agency of exactly this issue – a parallel power structure operating on a black budget:

https://wikispooks.com/wiki/File:Collateral_Damage_-_part_1.pdf

fairleft , February 21, 2017 at 7:36 am

The central task of the U.S. 'deep state' is to maintain or expand the permanent war economy. So it is the military-industrial complex. The top-of-food-chain spy agencies - whose primary task within the MIC is to create enemies and paranoia - are the brains and mouthpiece of the deep state.

begob , February 21, 2017 at 7:58 am

Didn't see any mention of organised crime. And does the DS distinguish between unlawful and illegal?

PH , February 21, 2017 at 8:53 am

Think kaleidoscope in motion. Colors are real but hard to predict. Preset patterns, but affected by outside movement.

I love histories, but I know they simplify and often mislead. Anyway, the trick is to spot the power emerging, not how it turned out with the last generation.

I suggest that the best approach looking forward is to start with the existing visible power bureaucracies both inside govt and outside govt but on its periphery.

For each behemoth, daily routine is the biggest driver. And with that usually goes shared values. Such things usually push events.

Offhand, I can think of a few starting points. If these separate bureaucracies are subject to some common control, I would like to know exactly who and exactly how.

Military/defense contractors. Mostly consumed with myopic concerns. Top generals and bureaucrats do think tank type stuff, but mostly technical. Obvious collusion with industry over defense budgets.

Not sure what attitude is toward Donald.

NSA and tech contractors. Foreign world to me, but obvious iceberg.

State Dept and White House and press chattering class. Propaganda organizations, basically. I am sure they have clubs and secret handshakes, but not sure should've called organized.

Main CIA. Narrow bureaucrats.

Off-the-books CIA intersecting with business. These have been the most spectacular stories and escapades. Edwin Wilson. Air America. Coups in the 50s. Maybe CIA assassination of Kennedy.

Did these operations drive history? Maybe. If those types of connections drive events today, what are they?

I do not see a unitary deep state.

Steven Greenberg , February 21, 2017 at 9:10 am

Nobody has raised the issue of COG. Here is one excerpt from Peter Dale Scott's book that talks about and somewhat defines it. Much more in the book of course.

One factor linking Dallas, Watergate, the 1980 "October Surprise" plot to prevent Carter's reelection, Iran-Contra, and 9/ 11 has been the background involvement in all these deep events of personnel from America's highest-level emergency planning, that is, Continuity of Government (COG) planning, known inside the Pentagon as "the Doomsday Project." The implementation of COG plans on 9/ 11 was the culmination of decades of such planning, and has resulted in the permanent militarization of the domestic United States, and the imposition at home of institutions and processes designed for domination abroad.

Scott, Peter Dale. The American Deep State: Wall Street, Big Oil, and the Attack on U.S. Democracy (War and Peace Library). Rowman & Littlefield Publishers.

Mattski , February 21, 2017 at 9:28 am

"Seems pretty big to be deep "

Not logical. The Deep State is those elements of the establishment that direct the course of government irrespective of e pluribus.

Perfectly good term, arising from popular usage, whose boundaries–hopefully needless to say–people who know better will not dictate anyway. Would have been much better, rather than to attack its use at the outset, just to investigate it. Elitist exercise, shaped like this.

[Feb 21, 2017] The rise in income inequality was promoted by the Reagan revolution. That in many ways was its purpose. It is also the agenda of Paul Ryan and his A Better Way .

Notable quotes:
"... Democrats sold out 35 years ago. ..."
"... Yes it's more profitable to have a non-unionized workforce. ..."
"... Doesn't mean we should. Doesn't mean we should get rid of environmental or safety regulations. ..."
Feb 21, 2017 | economistsview.typepad.com
pgl :  , -1

"it is never good to pass up an opportunity to remind readers that the rise in inequality since 1980 has been something that those who made the Reagan Revolution hoped to accomplish and are proud of.

Bargaining power has flowed to finance and the executive suite and away from the shop- and assembly-floor. Top tax rates have come way down. It could have been otherwise--this is, primarily, a thing that has happened in English-speaking countries. It has happened much less elsewhere. It could have happened much less here."

The rise in income inequality was promoted by the Reagan revolution. That in many ways was its purpose. It is also the agenda of Paul Ryan and his "A Better Way".

We used to know how to lower trade barriers and welcome new technology and have the benefits accrue to all. We lost our political will some 35 years ago. And electing Trump has not exactly regained our old mojo.

Peter K. -> pgl... February 20, 2017 at 12:24 PM , 2017 at 12:24 PM
"We lost our political will some 35 years ago. "

Who is this we kemosabe?

Democrats sold out 35 years ago. And you keep defending them.

libezkova -> Peter K.... , February 20, 2017 at 05:41 PM
"Democrats sold out 35 years ago."

True. Bill Clinton was elected in 1982. He essentially sold the Party to Wall Street, although first signs appeared under Carter...

Peter K. -> Sanjait... , February 20, 2017 at 03:39 PM
Yes it's more profitable to have a non-unionized workforce.

Doesn't mean we should. Doesn't mean we should get rid of environmental or safety regulations.

libezkova -> Peter K.... , February 20, 2017 at 05:44 PM
"it's more profitable to have a non-unionized workforce"

And that was partially accomplished by moving manufacturing South.

[Feb 21, 2017] Does the Chicago Bears quarterback really need 126 million for seven years -- up from to top NFL paid Joe Namath's 600K a couple of generations back?

Feb 21, 2017 | economistsview.typepad.com
Denis Drew : February 20, 2017 at 02:10 PM , 2017 at 02:10 PM
Manufacturing, manufacturing, manufacturing. Everybody misses the BRONTOSAURUS in the room. 4% of jobs gone from automation and trade - half and half -- true. But, 50% of employees have lost 10% of overall income -- out of the 20% of a couple of generations back.

(This reminds me of comparing EITC's 1/2 1% redistribution with 45% of workers earning less than $15 an hour.)

Could 50% of the workforce squeeze 10% of income back out of the 49% who take 70% (14% of their earnings!)? They sure could if they could collectively agree not to show up for work otherwise. Could if the 49% in turn could squeeze 10% out of the 1% (the infamous one percent) who lately take 20% of overall income -- up from 10% a couple of generations back.

(Does the Chicago Bears quarterback really need $126 million for seven years -- up from to top NFL paid Joe Namath's $600,000 [adjusted truly] a couple of generations back?)

Mechanism? Ask Germany (ask Jimmy Hoffa).

* * * * * *

In case nobody thought about it -- I never thought about until Trump -- it goes like this. The NLRA(a) was written in 1935 leaving blank the use criminal sanctions for muscling the labor market. Even if it did specify jail time for union busting it is extremely arguable that state penalties for muscling ANY persons seeking to collectively bargain (not just union organizers and joiners following fed procedure) would overlap, not violate federal preemption.

It seems inarguable -- under long established First Amendment right to organize collective bargaining -- that federal preemption cannot force employees down an organizing road that is unarguably impassable, because unenforceable.

Upshot: states may make union busting a felony -- hopefully backed by RICO for persistent violators.

6% union density is like 20/10 blood pressure. It starves every other healthy process.

RC AKA Darryl, Ron -> Denis Drew ... , February 20, 2017 at 02:14 PM
Understood. Lost manufacturing jobs was a big hit to union employment aside from the longshoremen.
ken melvin -> RC AKA Darryl, Ron... , February 20, 2017 at 02:37 PM
In 1967-68 was working the waterfront in SF. Saw the crews of Stevedores and Longshoremen load the ships; on the docks, down in the holds, using boom winches, forklifts, and muscle (dangerous work). By 1970, containerization had replaced 90% of them. And, it continues with computerization of storage and loading of containers (something I worked on in 1975). Remember the nephew in the 'Wire'? One day a week if he was lucky. David Simon knew of what he wrote.
cm -> RC AKA Darryl, Ron... , February 20, 2017 at 05:02 PM
One of the Michael Moore movies (probably but not sure whether about Flint) made the point rather explicitly - former manufacturing workers retrained as law enforcement or prison officers perhaps for employment in other states or "dealing with" their former colleagues driven to crime or at least into the arms of the law enforcement system.

[Feb 20, 2017] Why Extreme Inequality Causes Economic Collapse naked capitalism

Notable quotes:
"... Fig. 3a Income Share of U.S. Top 1% (Reich, 2013) & 3b Reich notes that the two peaks look like a suspension bridge, with highs followed by precipitous drops. (Original Source: Piketty & Saez, 2003) ..."
"... Paying for policy favors ..."
"... Removing constraints on dangerous behavior ..."
"... Increasing the public's vulnerability ..."
"... Increasing their own intake ..."
"... financial intermediaries. ..."
"... Or Ben Bernanke in his book "The Courage to Act": "Money is fungible. One dollar is like any other". ..."
"... "I adapted this general idea to show how, by affecting banks' loanable funds, monetary policy could influence the supply of intermediated ..."
"... no longer depend exclusively on insured deposits for funding, nondeposit sources of funding are likely to be relatively more expensive than deposits" ..."
"... The first channel worked through the banking system By developing expertise in gathering relevant information, as well as by maintaining ongoing relationships with customers, banks and similar intermediaries ..."
"... and thus hurt borrowers" (Bernanke [1983b]). ..."
"... A herding started by William McChesney Martin Jr, that thought "banks actually pick up savings and pass them out the window, that they are intermediaries ..."
"... obviously not so in any human activity. ..."
"... We believe Regenerative Economics can provide a unifying framework capable of galvanizing a wide array of reform groups by clarifying the picture of what makes societies healthy. But, this framework will only serve if it is backed by accurate theory and effective measures and practice. This soundness is part of what Capital Institute and RARE are trying to develop. ..."
"... haha, unfortunately it's the apex predator species that is in danger of sudden extinction as its prey declines. Of course the Darwinian analogy doesn't hold up well because Darwinian selection works on all individuals of a species without distinction. A much better analogy is a rigged game. ..."
Feb 20, 2017 | www.nakedcapitalism.com
According to a recent study by Oxfam International, in 2010 the top 388 richest people owned as much wealth as the poorest half of the world's population– a whopping 3.6 billion people. By 2014, this number was down to 85 people. Oxfam claims that, if this trend continues, by the end of 2016 the top 1% will own more wealth than everyone else in the world combined. At the same time, according to Oxfam, the extremely wealthy are also extremely efficient in dodging taxes, now hiding an estimated $7.6 trillion in offshore tax-havens.[3]

Why should we care about such gross economic inequality?[4] After all, isn't it natural? The science of flow says: yes, some degree of inequality is natural, but extreme inequality violates two core principles of systemic health: circulation and balance.

Circulation represents the lifeblood of all flow-systems, be they economies, ecosystems, or living organisms. In living organisms, poor circulation of blood causes necrosis that can kill. In the biosphere, poor circulation of carbon, oxygen, nitrogen, etc. strangles life and would cause every living system, from bacteria to the biosphere, to collapse. Similarly, poor circulation of money, goods, resources, and services leads to economic necrosis – the dying off of large swaths of economic tissue that ultimately undermines the health of the economy as a whole.

In flow systems, balance is not simply a nice way to be, but a set of complementary factors – such as big and little; efficiency and resilience; flexibility and constraint – whose optimal balance is critical to maintaining circulation across scales. For example, the familiar branching structure seen in lungs, trees, circulatory systems, river deltas, and banking systems (Fig. 1) connects a geometrically constant ratio of a few large, a few more medium-sized, and a great many small entities. This arrangement, which mathematicians call a fractal, is extremely common because it's particular balance of small, medium, and large helps optimize circulation across different levels of the whole. Just as too many large animals and too few small ones creates an unstable ecosystem, so financial systems with too many big banks and too few small ones tend towards poor circulation, poor health, and high instability.

In his documentary film, Inequality for All, Robert Reich uses virtuous cycles to clarify how robust circulation of money serves systemic health. In virtuous cycles, each step of money movement makes things better. For example, when wages go up, workers have more money to buy things, which should increase demand, expand the economy, stimulate hiring, and boost tax revenues. In theory, government will then spend more money on education which will increase worker skills, productivity and hopefully wages. This stimulates even more circulation, which starts the virtuous cycle over again. In flow terms, all of this represents robust constructive flow, the kind that develops human and network capital and enhances well-being for all.

Of course, economies also sometimes exhibit vicious cycles, in which weaker circulation makes everything go downhill – i.e., falling wages, consumption, demand, hiring, tax revenues, government spending, etc. These are destructive flows, ones that erode system health.

Both vicious and virtuous cycles have occurred in various economies at various times and under various economic theories and policy pressures. But, for the last 30 years, the global economy in general and the American economy in particular has witnessed a strange combination pattern in which prosperity is booming for CEOs and Wall Street speculators, while the rest of the economy – particularly workers, the middle class, and small businesses – have undergone a particularly vicious cycle. Productivity has grown massively, but wages have stagnated. Consumption has remained reasonably high because, in an effort to maintain their standard of living, working people have: 1) added hours, becoming two-income families, often with two and even three jobs per person; and 2) increased household debt. Inequality has skyrocketed because effective tax rates on the 1% have dropped (notwithstanding a partial reversal under Obama), while their income and profits have risen steeply.

We should care about this kind of inequality because history shows that too much concentration of wealth at the top, and too much stagnation everywhere else indicate an economy nearing collapse. For example, as Reich shows (Figure 1a & b), both the crashes of 1928 and 2007 followed on the heels of peaks in which the top 1% owned 25% of the country's total wealth.

Fig. 3a Income Share of U.S. Top 1% (Reich, 2013) & 3b Reich notes that the two peaks look like a suspension bridge, with highs followed by precipitous drops. (Original Source: Piketty & Saez, 2003)

What accounts for this strange mix of increasing concentration at the top and increasing malaise everywhere else? Putting aside the parallels to 1929 for a moment, most common explanations for today's situation include: the rise of technology which makes many jobs obsolete; and globalization which puts incredible pressures on companies to lower wages and outsource jobs to compete against low-wage workers around the world.

But, while technology and globalization are clearly creating transformative pressures, neither of these factors completely explains our current situation. Yes, technology makes many jobs obsolete, but it also creates many new jobs. Yet, where the German, South Korean and Norwegian governments invest in educating their workforce to fill those new jobs, the American government has been cutting back on education for decades. A similar thought holds for globalization. Yes, high-volume industrialism – that is, head-to-head competition over price of mass-produced, uniform goods – leads to a race to the bottom; that's been known for a long time. But in The Work of Nations (2010), Robert Reich also points out that the companies that are flourishing through globalization and technology are ones pursuing what he calls high-value capitalism, the high-quality customization of goods and services that can't be duplicated by mass-produced uniformity at cheap places around the world.

So, while the impacts of globalization and technology are profound, the real explanation for inequality lies primarily with an economic belief that, intentionally or not, serves to concentrate wealth at the top by extracting it from everywhere else. This belief system is called variously neoliberalism, Reaganomics, the Chicago School, and trickle-down economics. It is easily recognized by its signature ideas: deregulation; privatization; cut taxes on the rich; roll back environmental protections; eliminate unions; and impose austerity on the public. The idea was that liberating market forces would cause a rising tide that lifted all boats, but the only boat that actually rose was that of the .01%. Meanwhile, instability has grown.

The impact this belief system has had on the American economy and its capacities can be seen in American education. Trickle-down theories are all about cutting taxes on the wealthy, which means less money for public education, more young people burdened with huge college debt, and fewer American workers who can fill the new high-tech jobs.

To be fair, this process is not just about greed. Most of the people who participate in this economic debacle do not realize its danger because they believed what they were told by the saints and sages of economics, and many are rewarded for following its principles. So, what really causes the kind of inequality that drives economies toward collapse? The basic answer from the science of flow is: economic necrosis. But, let me flesh out the story.

Institutional economists talk about two main types of economic strategies: extractive and solution-seeking. (Hopefully, these names are self-explanatory.) Most economies contain both. But, if the extractive forces become too powerful, they begin to use their power to rig the rules of the economic game to favor themselves. This creates what scientists call a positive feedback loop, one in which "the more you have, the more you get." Seen in many kinds of systems, this loop creates a powerful pull that sucks resources to the top, and drains it away from the rest of the system causing necrosis. For example, chemical runoff into the Gulf of Mexico accelerates algae growth. This creates an escalating, "the more you have, the more you get" process, in which massive algae growth sucks up all the oxygen in the surrounding area, killing all of the nearby sea life (fish, shrimp, etc.) and creating a large "dead zone."

Neoliberal economics set up a parallel situation by allowing the wealthy to use their money to extract ever more money from the overall economy. The uber-wealthy grow wealthier by:

All of these processes help the already rich concentrate more, and circulate less. In flow terms, therefore, gross inequality indicates a system that has: 1) too much concentration and too little circulation; and 2) an imbalance of wealth and power that is likely to create ever more extraction, concentration, unaccountability, and abuse. This process accelerates until the underlying human network becomes exhausted and/or the ongoing necrosis reaches a point of collapse. When this point is reached, the society will have three choices: learn, regress, or collapse.

What then shall we do? Obviously, we need to improve our "solution seeking" behavior in realms from business and finance to politics and media. Much of this is already taking place. From socially-responsible business and alternative forms of ownership, to democratic reform groups, alternative media, and the new economy movement – reforms are arising on all sides.

But, the solutions we need are also often blocked by the forces we are trying to overcome, and impeded by the massive merry-go-round momentum of "business as usual." Today's reforms also lack power because they are taking place piecemeal, in a million separate spots with very little cross-group unity.

How do we overcome these obstacles? The science of flow offers not so much a specific strategy, as an empowering change of perspective. In essence, it provides a more effective way to think about the processes we see every day.

The dynamics explained above are very well known; they are basic physics, just like the law of gravity. Applying them to today's economic debates can be extremely helpful because the latter have devolved into ideological debates devoid of any scientific foundation.

We believe Regenerative Economics can provide a unifying framework capable of galvanizing a wide array of reform groups by clarifying the picture of what makes societies healthy. But, this framework will only serve if it is backed by accurate theory and effective measures and practice. This soundness is part of what Capital Institute and RARE are trying to develop.

55 0 0 3 11 This entry was posted in Banana republic , CEO compensation , Doomsday scenarios , Economic fundamentals , Guest Post , Income disparity , The destruction of the middle class on February 18, 2017 by Yves Smith . Subscribe to Post Comments 69 comments Disturbed Voter , February 18, 2017 at 6:18 am

System Dynamics of Steve Keene is clearly more useful than equilibrium dogma. He predicted the 2008 crash, though I think he was only lucky .. modeling is always only good for interpolation, never for extrapolation, unless you are lucky enough to only be dealing with linear changes over time.

Spencer , February 18, 2017 at 7:02 am

POSTED: Dec 13 2007 06:55 PM |
The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.
10/1/2007,,,,,,,-0.47,,,,,,, -0.22 * temporary bottom
11/1/2007,,,,,,, 0.14,,,,,,, -0.18
12/1/2007,,,,,,, 0.44,,,,,,,-0.23
1/1/2008,,,,,,, 0.59,,,,,,, 0.06
2/1/2008,,,,,,, 0.45,,,,,,, 0.10
3/1/2008,,,,,,, 0.06,,,,,,, 0.04
4/1/2008,,,,,,, 0.04,,,,,,, 0.02
5/1/2008,,,,,,, 0.09,,,,,,, 0.04
6/1/2008,,,,,,, 0.20,,,,,,, 0.05
7/1/2008,,,,,,, 0.32,,,,,,, 0.10
8/1/2008,,,,,,, 0.15,,,,,,, 0.05
9/1/2008,,,,,,, 0.00,,,,,,, 0.13
10/1/2008,,,,,,, -0.20,,,,,,, 0.10 * possible recession
11/1/2008,,,,,,, -0.10,,,,,,, 0.00 * possible recession
12/1/2008,,,,,,, 0.10,,,,,,, -0.06 * possible recession
Trajectory as predicted:
BERNANKE SHOULD HAVE SEEN THIS COMING. IN DEC. 2007 I COULD.

Disturbed Voter , February 18, 2017 at 10:39 am

With a simple spreadsheet projection of flows one can see a lot, without fancy mathematics, using just simple difference equation models, even models that display cyclical behavior. For example, with any internal software development, the quantity of legacy applications increase as they are created, unless retirement of legacy applications is more rapid.

More often replacement occurs, rather than actual retirement. But retirement of legacy applications is harder than you might think, because of real dependency one can't retire them by fiat. The cost of maintaining legacy applications, isn't zero. So with a fixed software development/maintenance budget, the percentage of expenditures to legacy applications approaches saturation, even without figuring in the cost of replacement (similar to the rolling over of loans vs retiring of loans). Short term maintenance using patches, can only continue for so long, eventually wholesale replacement is necessary.

Usually the only way to retire a legacy application is to produce a newer and more expensive application, that itself has higher maintenance costs. We dig the problem well deeper. Thus the exponential decay of funds available for new development, or replacement development, not only strangles new initiatives, but even strangles the ability to maintain operations long term. That is why there are still millions of lines of Cobol still working every day.

There is no free lunch, entropy reigns unless countered by new forms of initiative. Usually the end result is an extension and dilution of the problem, which then resumes decay on a larger scale. This is what happens with the attempt to allay insurance costs by ever larger pools, but there is a limit to the size of the pool, once that limit is reached, the gambit no longer works. Long term problems overwhelm short term solutions.

Generalfeldmarschall von Hindenburg , February 18, 2017 at 1:28 pm

That's Joseph Tainters rap if I remember it right.

Disturbed Voter , February 18, 2017 at 1:33 pm

An exponentially increasing real economy covers all sins. In absence of that, an exponentially increasing debt economy covers all sins, temporarily because interest has a way of catching up with you. See Greece.

Mattski , February 18, 2017 at 6:38 pm

"An exponentially increasing real economy covers all sins." Not if you're Mother Nature–or maybe only for another 10-40 years.

kimsarah , February 18, 2017 at 9:17 pm

Banks turned off the money spigot to developers by the start of '07, if I recall. Developers and policy makers knew then there was a recession, but the public was kept in the dark. After the market crash, the consumers were punished instead of the Wall Street looters.

John , February 19, 2017 at 7:23 am

The only people who predicted the crisis were a handful of post-Keynesians and Marxists. I'm more familiar with the work of the latter, but for them it wasn't luck. They identified structural problems with the economy that could not be fixed by simply utilizing stabilizers (fiscal/monetary policy) and knew a massive crisis would occur once the bubbles popped and exposed the real economy's underlying weakness. Some believed that this crisis was the result of the tendency of the rate of profit to fall and simultaneous downturns in the business cycle and the profit cycle. I think the more convincing view is that low profit rates in the manufacturing sector caused by a global crisis of overproduction/under-utilization of capacity has meant that the real economy has been weak since the 70's and that growth since then has come from asset bubbles (Japanese real estate in the 80's, US stock market in the 90's, US real estate in the 00's). These are problems that no amount of fiscal stimulus can fix in the long run.

Spencer , February 18, 2017 at 6:58 am

The author briefly touched on it. It's ALL about the circular flow of savings. And the flow's stopped beginning in 1981, though really in 1966 (also Larry Summer's start of secular strangulation). That's why N-gDp decelerated and there was a 35 year bull market in bonds.

You have to retain the capacity, like Albert Einstein, to hold two thoughts in your mind simultaneously – "to be puzzled when they conflicted, and to marvel when he could smell an underlying unity". "People like you and me never grow old", he wrote a friend later in life. "We never cease to stand like curious children before the great mystery into which we were born".

The smartest man to walk on earth was Leland Pritchard, Ph.D. Chicago, 1933, Economics, MS, Syracuse, statistics.

All bank-held savings originate, and are impounded and ensconced, within the commercial banking system. Say what? Yes, the CBs do not loan out existing deposits, saved or otherwise. The CBs always create new money whenever they lend/invest (loans + investments = deposits). Thus bank-held savings are un-used and un-spent. They are lost to both consumption and investment. From the standpoint of an individual bank, the institution is an intermediary (micro-economics), however, from the standpoint of the collective system of member banks (macro-economics), the institution is a deposit taking, money creating, financial institution, DFI.

The upshot is profound. The welfare of the CBs is dependent upon the welfare of the non-banks (the CB's customers). I.e., money (savings) flowing through the NBs never leaves the CB system. Consequently the expansion of "saved" deposits, in whatever deposit classification, adds nothing to a total commercial bank's liabilities, assets, or earning assets (nor the forms of these earning assets). And the cost of maintaining interest-bearing deposit accounts is greater, dollar for dollar, than the cost of maintaining non-interest-bearing demand deposits. Interest collectively for the commercial banking system, is its' largest expense item (and thus its' size isn't necessarily synonymous with its profitability).

This is the source of the pervasive error (and our social unrest, e.g., higher murder rates), that characterizes the sui generis Keynesian economics (the Gurley-Shaw thesis), that there is no difference between money and liquid assets.

Spencer , February 18, 2017 at 7:34 am

The CBs & NBs have a symbiotic relationship. And so do the have's and have not's. Unless the upper quintile's savings are expeditiously activated, a corrosive degenerative economic impact is subsequently fostered.

The Golden Era in U.S. economics (Les trente glorieuses) was where democratized pooled savings were expeditiously activated (put back to work) and matched with real-investment, non-inflationary, outlets by the thrifts, MSBs, CUs, and S&Ls (principally investments in long-term residential mortgages). And in the good ol days, we had gov't incentivized, FSLIC safety nets for non-bank conduits. Now we only have FDIC safety nets for the commercial bank clientele (which further retards savings velocity).

I.e., "risk on" is not higher FDIC insurance coverage (the FDIC formally modified the assessment base in 2011 to include all bank liabilities – which along with the LCR, contracted the E-$ market), not increased Basel bank capital adequacy provisioning (which literally destroys the money stock), not an increased FDIC assessment fee on 1/1/2007, or 4/1/2009, or 4/1/2011, or an increased churn in speculative stock purchases (the transfer of ownership in existing assets).

digi_owl , February 18, 2017 at 7:39 am

"uses recent scientific advances – specifically, the physics of flow[2″

Ye deities

craazyman , February 18, 2017 at 7:53 am

This post laudably critiques wealth inequality, but it suffers from the "Newtonia Delusion" that confuses economic thought in general through metaphorical malapropism.

Physcial systems possess a determinism and time-invariant structure that enables mathematical modelling. Economic systems are cultural artificacts that are not time-invariant. Money is a cultural construct, a form of social imagination and lacks any sort of deterministic attributes. Newtonian metaphors of flow and accumulation restrict analytical illlumination even though they enable quick and simple calculation.

Money is only one form of a "coordinate system" that enables the measurement of forms of social interaction and cooperation. And it's one-dimensional. This makes it useful given its parsimonious simplicity but it badly restricts complete explanatory power. Physicists know the choice of a coordinate systems influences measurements of phenomenon, and they developed math techniques to neutralize that influence - I think use of tensors in relativity is one example. Economics relies on "money" and resultant ideas of "growth" or 'recessionn" because that's all it knows how to do.

First, what does "collapse" mean in the context of the post. The word is vague, undefined and subject to a multitude of interpretations - that's not "scientific" at all. "Wealth" is also vague. Presumably it means possession of assets that can be converted into money, so in effect is uses "money" as a sole coordinate basis, and that's reasonable as a form of dimensional reduction, but it fails to measure the implied asset value of any sort of social safety net available to those without assets. That's no rationale for inequality - and anybody wants a job more than a safety net - but it's a logical flaw. Third, the nature of economic structures and cultural relations isn't easily quantifiable or translateable into money; living in a just, fair and inclusive society has an intrinsic value that defies easy measurement through the "money basis". Measuring relies instead on application of a sense of justice and honest sensibility.

It would be bettter to start analysis with a non-monetary vision of the social rights any citizen of a community should have access to. This form of thinking in fact was the normal and dominant form over most of human history, when people lived in non-monetary tribal structures. And what their implied responsibilities are to gain that accesss. Use that as a time-invariant basis and then introduce money but only as one method of measurement of economic change, there could be other social indicators that might be used as coordinate systems too; use of these could result in very different measurements of ecoonomic phenomeenon than result with the money basiis. That would force the sort of thinking that's required for analytical clarity and ompleteness, but that doesn't exist in economics

(See I can bang out a comment that doesn't mention jungle boogie butts or hot women! Calling women hot isn't bad, as long as it's respectful and flattering and inclusive. Women in general are hot! What do you want? to live in a world full of gay guys or what? Hahaha. Sorry I can't help it.)

Steve H. , February 18, 2017 at 11:46 am

Turchin has been working on proxies, to get some measures of well-being and political instability. One measure of social rights could be the right to live, so life expectancy could be used. Dead is dead and is a hard number. Chicago police historically have a different criteria of what my rights are than I do, so the ecological measures can avoid such definitional fuzziness.

Another Turchin point relevant to the post is that in-group variance is only meaningful used as a multiplier of in-group selection, and in context of other groups. Extreme inequality does not necessarily cause economic collapse, and coherent elites consistently crush popular revolts. The "the more you have, the more you get" feedback loop can also be seen as a consolidation and success of a certain trait ("rich"), and a re-sort of within-group dynamics (national citizenry) to between-group dynamics (haves & nots).

(Also, economics does not concern itself with ompleteness, as rational actors cannot be omplete, and an agent who is omplete often withdraws from economic systems.)

Vedant Desai , February 18, 2017 at 1:03 pm

I believe that biggest problem in economics is not the dogma created by money(though its a problem of Course) , but rather biggest problem is lack of a clearly defined goal. "Economic development" ,which is generally termed as goal of economics , is very ambiguous and this ambiguity is creating problems.

susan the other , February 18, 2017 at 1:51 pm

Thanks Craazy – that was very coherent. more please.

UserFriendly , February 18, 2017 at 2:28 pm

Physcial systems possess a determinism and time-invariant structure that enables mathematical modelling. Economic systems are cultural artificacts that are not time-invariant.

Very, very few physical systems involve time invariant modeling. Almost every physical system represented by a mathematical model describes how that system changes with time. Otherwise it wouldn't be a very useful model. Few things can be said to be at steady state and even when they are it is usually a simplification, not an outgrowth of time invariance. For example a chemical reaction A + B-> C at rate k1 and C -> A + B at rate k2 is said to be at equilibrium (steady state) when k1=-k2. Even at steady state the reaction is proceeding in both directions and can be thrown out of equilibrium by a change in concentration, temperature, volume, or any host of other factors. After the shock the system will again tend towards an equilibrium but there is no requirement that the new equilibrium be the same as the last one. And all the equations that describe how we went from equilibrium 1 to 2 all involve time. Neoclassical morons obsessed with equilibrium seam to be confused by this and assume time is irrelevant and that full employment will always return.

Economists are pretty much the only people I see that try to use time invariant models. I think it is a great step forward that economists like Keen have been trying to use the full spectrum of time variant models. The fact that the models are relatable to models of other physical systems is more an outgrowth of calculous than anything else.

craazyman , February 18, 2017 at 3:06 pm

I actually was out today doing stuff & plan to go star gazing tonite!

What I meant is the equations that map the movement of the moon and planets or heat diffusion or chemical reactions or sound propagation worked in November 1887 the same way they'll work in July 2020.

Of course experimental measurements change through time, depending on the phenomenon being measured. But the natural phenomenon modeled by the equations themselves are time invariant as are the equations, or science wouldn't work. That's why they're called natural laws.

UserFriendly , February 18, 2017 at 4:17 pm

Ah. You mean Frame Invariant , not time invariant.

craazyman , February 18, 2017 at 4:55 pm

Timeframe invariant! :-)

H. Alexander Ivey , February 19, 2017 at 3:25 am

Now wait a minute here. While I appreciate getting my terms correct and such – frame invariant, yeah, that's what I need to know – craazyman is a gift not to be distracted or encouraged wrongly. Yes, his posting clarified the great lie of most economic theory and its teaching and modeling, but his calling is greater than that. "jungle boogie butts or hot women" are rare on this site and should not be lightly diverted. Not that I'm implying that our hostess or commentators of the female persuasion aren't "hot women" or that jungle boogie butts aren't finance, economics, politics, or power, but based on past personal history, if I tried a craazyman, or even a craazyboy, posting, I would be forever marked as hopeless.

Ruben , February 19, 2017 at 12:36 am

Physical systems can be time-variant in that way too, it's called a regime shift. We have observed that in several real natural systems. In some cases apparent randomness actually is very complicated but fully deterministic dynamics. Look up "bifurcation diagram". Mathematical analysis can deal with that too.

Instead of the monetary system and flow, the analysis of human populations, including the production and exchange of the fruits of their labour, should start with the amount of cooperation as the driving variable (or coordinate as you prefer to say)?

Thanks for the thought-provoking post.

Sam F , February 18, 2017 at 8:01 am

Odd that education investment is shown in the article as part of the loop between employment and consumer spending. That is a very slow regenerative path compared with the direct effect of employment, spending, and labor demand.

The article wastes time extolling circulation merely because it resembles that in natural systems such as tigers, but these do not necessarily serve human interests. It benefits most people simply because they need the inputs and outputs.

oho , February 18, 2017 at 9:10 am

>>> But this sounds an awful lot like a new improved version of system dynamics,

One of the board members from Capital Institute (sounds like the "Human Fund") is from Soros-backed the Institute for New Economic Thinking.

And Soros loves reflexivity, which is basically repackaged system dynamics.

not being aluminum foil-y. just interesting how Soros has his fingers in so many pots.

http://capitalinstitute.org/board/

oho , February 18, 2017 at 9:12 am

just institute a progressive tax on bank assets above-say-$700 billion. would literally only affect a handful of banks and do much to rein in the seize of the megabanks.

oh wait, all these banks are blue state banks (JPM, C, WFC, BAC) and friends w/Schumer, Pelosi and Uncle Warren owns big chunks in WFC and AXP.

Sound of the Suburbs , February 18, 2017 at 9:41 am

Capitalism is a balance between supply and demand but we only put in half a system.

1) Money at the top is mainly investment capital as those at the top can already meet every need, want or whim. It is supply side capital.

2) Money at bottom is mainly consumption capital and it will be spent on goods and services. It is
demand side capital.

Marx noted the class struggle between the two sides that neither can win, to do so destroys the system, either supply or demand will cease to exist.

The balance has yet to be recognised and we flick between the two sides until everything crashes into the end stops.

Before the 1930s – Supply Side, Neoclassical Economics

By the 1920s, productivity has reached a stage where supply exceeds demand and extensive advertising is required to manufacture the demand for the excess supply.

Taxes are lowered on the wealthy and there is an excess of investment capital which pours into the US stock market. The banks get in on the act and use margin lending to fuel this boom in US stocks.

There is a shortage of consumption capital and the necessary consumption can only be maintained with debt.

1929 – Wall Street Crash

The investment capital was used to blow an asset bubble and not for productive investment, it all ends in tears. The Great Depression is the debt deflation that follows from an economy saturated with debt.

After the 1930s – Demand Side, Keynesian Economics

The New Deal starts the turnaround of the US economy and after the Second World War there is the Golden Age of the 1950s and 1960s. Redistributive capitalism looks after the demand side of the equation.

With the target of full employment, the unions start to abuse their power and by the 1970s we enter into stagflation. There is a shortage of investment capital and demand exceeds supply leading to inflation, there is not enough investment capital to redress the balance.

After the 1980s – Supply Side, Neoclassical Economics

Taxes are lowered on the wealthy and there is an excess of investment capital which pours into various different asset classes and the first round of crashes occur in the late 1980s. Leading to an early 1990s recession.

There is a shortage of consumption capital and the necessary consumption can only be maintained with debt.

After the early 1990s recession the speculative, investment capital look for another bubble to blow and finds the new dot.com companies.

Housing booms take off around the world, a speculative bubble for everyone to get involved with and the UK and Japan have already been through their first boom/bust by 1989.

Wall Street get's into 1920s mode and leverages up the speculative bubble that is occurring there.

2008 – Wall Street Crash

The West is laid low and growth is concentrated in the East but they start to use debt to keep things running.

Even with the Central Banker's best efforts the global economy falls into the new normal of secular stagnation, the debt repayments are a constant drag on the global economy.

2017 – World's eight richest people have same wealth as poorest 50%

All that investment capital with almost nowhere to invest due to the lack of demand.

We just swing from the supply side, to the demand side and back again until we crash into the end stops.

We could recognise the system requires a balance between supply and demand.

Jabawocky , February 18, 2017 at 1:58 pm

An interesting idea, which adds economics itself to the dynamics of the economic system.

susan the other , February 18, 2017 at 2:14 pm

a balance in real time, not over decades with crashes and booms harder to do globally than nationally which is prolly why nationalism is rising it was China imploding c. 2008 that brought the growth of the global economy to a stop, I read somewhere .anyway the growth-forever premise of globalism was nuts. Not even the push for austerity by the neoliberals could make the required adjustments – and not for lack of trying. Yes a new balance (good shoes ;-) is what we need. One that understands the old saying 'form follows function' and create a functioning economy, the scaffold of a new sustainable human society. One in which banking actually follows the economy.

Sound of the Suburbs , February 18, 2017 at 5:39 pm

Bankers should be servants of the real economy and nothing more.

flow5 , February 19, 2017 at 11:28 am

It's not a math error, it's an accounting error. It wasn't precipitated as Alan Greenspan pontificated in his book "The Map and the Territory", viz., FDR's Social Security Act. It wasn't Nixon who introduced "indexing". It wasn't because from 1959 to 1966 the federal gov'ts net savings was in a rare surplus. It wasn't because between 1965 & 2012 total gross domestic savings (as a percent of gDp) declined from 22% to 13% (9 percentage points).

No, the New York Times sobriquet, the "Three-Card Maestro's" error, like all other Keynesian economists, is the macro-economic persuasion that maintains a commercial bank is a financial intermediary (conduit between savers and borrowers matching savings with investment):

Greenspan: "Much later came the evolution of finance, an increasingly sophisticated system that enabled savers to hold liquid claims (deposits) with banks and other financial intermediaries. Those claims could be invested by banks in in financial instruments that, in turn, represented the net claims against the productivity enhancing tools of a complex economy. Financial intermediation was born"

Or Ben Bernanke in his book "The Courage to Act": "Money is fungible. One dollar is like any other".

"I adapted this general idea to show how, by affecting banks' loanable funds, monetary policy could influence the supply of intermediated credit" (Bernanke and Blinder, 1988)."

For example, although banks and other intermediaries no longer depend exclusively on insured deposits for funding, nondeposit sources of funding are likely to be relatively more expensive than deposits"

The first channel worked through the banking system By developing expertise in gathering relevant information, as well as by maintaining ongoing relationships with customers, banks and similar intermediaries develop "informational capital."

"that the failure of financial institutions in the Great Depression increased the cost of financial intermediation and thus hurt borrowers" (Bernanke [1983b]).

A herding started by William McChesney Martin Jr, that thought "banks actually pick up savings and pass them out the window, that they are intermediaries in the true sense of the word."

From the standpoint of an individual bank (micro-economics), a bank is an intermediary, however, from the standpoint of the entire economy, the system process (macro-economics), a bank is a deposit taking, money creating, financial institution.

The promulgation of commercial bank interest rate deregulation (banks introducing liability management, buying their liquidity, instead of following the old fashioned practice of storing their liquidity), i.e., the removal of Reg. Q ceilings (the non-banks were already deregulated until 1966), by the oligarch – the ABA, (public enemy #1), or an increasing proportion of time to transaction deposits liabilities within the DFIs, metastasized stagflation and secular strangulation. Remunerating IBDDs exacerbates this phenomenon (as subpar R-gDp illustrates).

I.e., every time a commercial bank buys securities from, or makes loans to, the non-bank public it creates new money – deposit liabilities, somewhere in the system. I.e., deposits are the result of lending, and not the other way around. Bank-held savings are un-used and un-spent. They are lost to both consumption and investment. Unless savings are expeditiously activated outside of the system (and all savings originate within the payment's system), thru non-bank conduits, said savings exert a dampening economic impact (destroying saving's velocity & thus AD). I.e., savings flowing thru the non-banks, never leaves the CB system.

LT , February 19, 2017 at 12:28 am

I've never believed a country joining the casino economy was a sign of strength.

Sound of the Suburbs , February 19, 2017 at 5:36 am

Debt based consumption is always unsustainable, people max. out on debt.

Greece was happy with debt based consumption until it maxed. out on debt.

Anything that relies on debt based consumption in the long term can only fail.

Neoliberalism relies on debt based consumption, it works until it doesn't.

witters , February 18, 2017 at 5:36 pm

"With the target of full employment, the unions start to abuse their power."

Yeah, sure.

Actually full employment is experienced by capital as an abuse of its power.

Here is Kalecki in 1943 explaining beforehand how this generates neoliberalism.

http://delong.typepad.com/kalecki43.pdf

tongorad , February 18, 2017 at 6:18 pm

Yes, I'd like to see what this abuse of union power looked like. Any evidence of this?
Landlords and bosses were reduced to beggars?

PhilM , February 18, 2017 at 10:13 am

Craazyman says it all, but I have to say it too, just for my own mental health.

How often do social "scientists" have to make this same mistake? Biology is not physics, and human society is biology, and economics is not even close to accurately describing human society, not even the economics part of it.

Equilibria are achieved, and thermodynamic laws obeyed, on much greater and on much smaller scales than an economy, which is not even a system, per se. Life is anti-entropic, but the universe, the solar system, is not. Communities are not "social networks." Terry Pratchett as usual brings common sense to bear on metaphors like this. Metaphor, you know, using words to convey something like the truth, but not exactly: "Oh, so it's a lie, then."

Vedant Desai , February 18, 2017 at 12:50 pm

How economy is not a system?

Jabawocky , February 18, 2017 at 2:07 pm

You have just lost me. Of course economics is a complex system but it is a system nonetheless. Wynne Godley's sectoral balance model is an excellent example of a systems approach to economics, and it's precisely the systems peoperties that attract me to it. MMT is a systems approach by design and easily approached mathematically in that way if desired. I have often considered how I would do it but no doubt there is someone more able to do it than me.

The bonus of a systems approach would be the possibility of a multitude of possible equilibrium states, some could be fixed, some oscillatory if they include feedback with delay.

The author could also consider adding futile cycles to her list of cycles, long recognised by biochemists.

PhilM , February 19, 2017 at 4:10 am

Craazyman says it above. A "system of pulleys" is a system. A "solar system" is a system. A galaxy, a liter of sodium bicarbonate solution under defined temperature and pressure conditions, these are systems. How is "economics" a system? What is it even a system of? Can you define the parameters of even one of the aspects of economics in some way that does not "leak energy" through every other aspect of human activity, which is not accounted for in some way by the "system" of economics? You can try, but you can't do it. That is why economics is scientific just like astrology: it describes and explains everything, but its only prediction is more jobs for its practitioners.

Foppe , February 19, 2017 at 6:28 am

There are "closed" and "open" systems. The behavior of the former can be modeled and understood; the latter, less so (possible only to some extent, and heavily dependent on the intellectual framework that you bring to the table).

Jabawocky , February 19, 2017 at 7:24 am

My experience is opposite. Usually in systems approaches most of the detail can be ignored until it becomes important. They do not require knowing the details of the system, instead they try to simplify as far as is practical. Systems approaches attempt to infer micro from gross macro behaviour. This is fundentally opposite to orthodox economics. Godley's model illustrates this well. You don't need to know details about every transaction because parameters for aggregated transactions can be inferred from macro data. You don't need to assume anything about motivations of individuals or firms, but if necessary you could try to infer them.

PhilM , February 19, 2017 at 12:28 pm

I clearly need to go and do reading on open systems, because understanding them makes for a richer intellectual life, like poetry, or skimming rocks. For me, the chafing starts when people try to apply a rigorous, mathematically based scientifically accepted reproducible set of theories like those of fluid dynamics (itself by no means fully elaborated) to a field where the described system cannot be even be defined by consensus.

What, for instance, exactly constitutes an "economic system," or a "system of economics," or an "economy"? Where is the universally accepted definition of something even as basic as money, a definition with scientific reliability, like the definition of an atom in 1930? They just aren't there. You can tell me yours, but it will not be the same as his, or hers. If real scientists behaved that way, there could be no breakthroughs: without a definition, there is nothing even solid enough to break through.

And by scientific, I just have to fall back on Popper, however old-fashioned that may seem. The propositions of economics, like those of astrology and sociology, and also of human nutrition, and so many other fields flogged by their practitioners, remain unaccompanied by experimental methodologies that result in reliable predictions of reproducible results. They are therefore prolific with unfalsifiable claims. They are, therefore, fraudulent at worst and noisy at best, at a time where the direction of the public discourse is increasingly controlled by central authorities with agendas. A signal among the noise is harder and harder to distinguish without the further impediment of additional publish-or-perish verbiage which will be, more often than not, weaponized by an interest group, if that was not actually the reason for its creation to begin with.

Systematizers of non-scientific systems are either virtuous "pre-scientists" or frauds. What they claim as the wider social value of their work is the discriminating test. Alchemy and astrology of yore ultimately evolved into chemistry and astronomy, without actually contributing much information as such: but without the need to make magic or gold from powders, alembics, crucibles, and retorts, those tools moved into hands directed by serious, patient minds, where they produced useful and reliable information. (Not that circus entertainment, handwaving, and noise were not great disseminators and motivators of science, and remain so today!)

Until the dynamics of human society and psychology have been fully described by anthropology, there will not be a "fundamental atomic theory" for Economics to use to underpin its scientific pretensions. It still rests completely on demonstrably untrue assumptions, rules that can be proven not to apply to human behavior. Most recently, the use of the "normal curve" as generally applicable to economic "systems," because of its near-universal employment in statistics, had catastrophic results. This was easily predicted by anyone who has worked with the normal curve; the Central Limit Theorem that underpins the normal curve assumes that the assembled variables are independent, not related functions of each other; and this is obviously not so in any human activity. So much of the use of the normal curve is nothing more than hand-waving hocus-pocus.

No serious reputable historian would claim any longer to be a scientist, and if he did, he would be no true Scotsman, either. But then, despite what I seem to be doing on these forums, neither would a professionally trained historian think to dictate public policy by appealing to the systematic rigor of his craft.

Economists today should modestly retreat from their claims to exercise any influence on public policy and direct their efforts elaborating a true science. I believe that may never happen; and I personally fear the unintended consequences that will result from the political use of the kind of knowledge about human motivations and collective activity that will be required to bring it about; maybe less, however, than I fear nuclear war or planetary desolation through aggressive environmental destruction, which may be the alternative outcomes to that kind of advance.

Bam_Man , February 18, 2017 at 10:16 am

"Flow Dynamics" of Money Supply are a BIG tell.
Velocity of MZM Money Supply (Money of Zero Maturity) is falling like a rock and at an ALL-TIME low.

flow5 , February 19, 2017 at 12:43 pm

Money velocity falls because more and more savings are impounded and ensconced within the payment's system. This started in 1981 with the plateau in deposit financial innovation, the widespread introduction of ATS, NOW, and MMDA accounts. Thus money velocity, formally a monetary offset, started decelerating dropping N-gDp with it (and producing the 35 year bull market in bonds).

This should be evident with the remuneration of IBDDs beginning in Oct. 2008. I.e., the 1966 S&L credit crunch is the economic paradigm and precursor (lack of funds, not their cost). The "complete evaporation of liquidity" on 8/9/2007 for BNP Paribas, "runs on ABCP money funds", "shortage of safe, liquid, assets", "the funding crunch forced fire sales", "efforts to replace funding that had evaporated in the panic", i.e., non-bank dis-intermediation (an outflow of funds or negative cash flow).

"Our goal was to increase the supply of short-term funding to the shadow banking system"
Ben Bernanke, August 10, 2007:

"Our goal is to provide liquidity not to support asset prices per se in any way. My understanding of the market's problem is that price discovery has been inhibited by the illiquidity of the subprime-related assets that are not trading, and nobody knows what they're worth, and so there's a general freeze-up. The market is not operating in a normal way. The idea of providing liquidity is essentially to give the market some ability to do the appropriate repricing it needs to do and to begin to operate more normally. So it's a question of market functioning, not a question of bailing anybody out."

I.e., Bankrupt u Bernanke doesn't know a credit from a debit. Bad Ben was solely responsible for the world-wide GR. My "market zinger" forecast of Dec. 2012 foretold of the expiration of unlimited transaction deposit insurance (putting savings back to work), not a "taper tantrum, not budget "sequestration".

Jesper , February 18, 2017 at 10:17 am

Seems like a sales-pitch to the 1% trying to convince the 1% that sharing would be good .. I have my doubts about that strategy, the 1% respects power and care very little (if anything at all) for the common good. Use the power of the many in an democracy and force through the needed changes.

Disturbed Voter , February 18, 2017 at 10:45 am

Continuing the model of a firm that requires software to function. If the executives of the firm keep taking expensive vacations at the expense of the firm, starving the software development/maintenance department of resources .. then even if there were no other systemic problems, the firm will fail (unless bailed out by a greater entity, as happened in 2008/2009). But in the end, who will be big enough, after we have extended the risk pool to the entire planet, to bail out the planet, from foolish management? I would suggest that the Roman Empire failed because it was unable to overcome either long term systemic trends, nor irresponsible management.

Robert NYC , February 18, 2017 at 11:11 am

Inequality is directly correlated to corruption and the U.S. has an exceeding corrupt political economy, hence the extreme inequality. Germany and Japan, to take two prime examples, are part of the same global system and are subject to the same forces, technology, corporate tax arbitrage strategies, etc but neither of them have any where near the inequality of the U.S. It's also worth noting they don't have financial grifters like Mitt Romney and Steven Schwarzman amongst their most esteemed citizens.

So yes, it is all pretty complicated but at the end of the day the U.S. is one of the most corrupt countries on Earth, certainly the most corrupt of the Western democracies so our problems are no surprise. All this talk about globalization, tax policy, education and technology are all distractions. And that doesn't even begin to touch on the subject of our monetary system which is at the root of the corruption.

Dick Burkhart , February 18, 2017 at 1:03 pm

Right on! – And the corruption is permitted, even encouraged, by the "greed is good" philosophical basis of mainstream economics, and the concentration of both media ownership and campaign finance and lobbying in the hands of the wealthy.

David , February 18, 2017 at 11:15 am

Yes, this does deserve some kind of award for expressing a simple idea in a pointlessly complicated way. When I was studying economics in the paleolithic era, we were taught about the "propensity to consume" – in other words the idea that the poorer you were the more of any extra income you would spend as opposed to save. So if you give everyone on the minimum wage 20% more, then they will probably put it straight back into the economy. If you give billionaires 20% more they probably won't. The more widely wealth is spread, the more of it will be spent. This isn't a scientific law, but it's an observation borne out by common sense.

Gman , February 19, 2017 at 4:06 am

Hallelujah!

Even Henry Ford, not exactly known for his altruism or philanthropy, knew it made sense to give his workers a significant rise so that they could afford the cars they were building for him.

Denis Drew , February 18, 2017 at 11:22 am

I can't read this whole post this morning - but - my one note tune: 6% labor union density in non-gov work is like 20/10 blood pressure : it starves every other healthy process - even while starving the employee herself.

Easy way back: if the 1935 Congress had intended (they didn't) to leave any criminal enforcement of NLRA prohibited union busting to individual states - Congress would not have had to change one word of the NLRA. States in fact were left to make any form of collective bargaining (NLRA connected or not) muscling an economic felony. There is no problem of federal preemption when the area has been left blank.

Nor may the fed force local labor down an impassable road to union organizing - because rules of road unenforceable and unenforced - when a First Amendment protected right is at stake. To state that clearly: the First Amendment is violated when government insists on a mode of action that dismembers freedom of economic association before it starts.

JEHR , February 18, 2017 at 12:07 pm

Sometimes metaphors bring clarity to a vision and sometimes metaphors befuddle: I am befuddled.

heresy101 , February 18, 2017 at 1:27 pm

I'll second that. He is either a scab and Pinkerton employee or provides a confused argument in support of unions?

Grebo , February 18, 2017 at 5:00 pm

I think he's saying more unions are needed, but the Federal Government left it up to the states to stop the union busting, which they have declined to do. The Feds can't enforce union membership or collective bargaining as that would violate the first amendment right to free association.

Denis Drew , February 18, 2017 at 8:50 pm

Let's try again - maybe it was too compressed

[cut-and-paste]
America should feel perfectly free to rebuild labor union density one state at a time - making union busting a felony. Republicans will have no place to hide.

Suppose the 1935 Congress passed the NLRA(a) intending to leave any criminal sanctions for obstructing union organizing to the states. Might have been because NLRB(b) conducted union elections take place local by local (not nationwide) and Congress could have opined states would deal more efficiently with home conditions - or whatever. What extra words might Congress have needed to add to today's actual bill? Actually, today's identical NLRA wording would have sufficed perfectly.

Suppose, again, that under the RLA (Railroad Labor Act - covers railroads and airlines, FedEx) - wherein elections are conducted nationally - that Congress desired to forbid states criminalizing the firing of organizers - how could Congress have worded such a preemption (assuming it was constitutionally valid)? Shouldn't matter to us. Congress did not!

Dick Burkhart , February 18, 2017 at 1:19 pm

"Renewable energy" is obviously the foundation of Regenerative Economics, simply because energy itself is the foundation of all economics (as well as of all life and of the "active" part of the universe). Yet all the focus on renewable energy in recent years has done little or nothing to stop escalating economic inequality.

I think a big thing missing from RARE is a theory and program for power. What we need are institutional values and structures that will keep greed under control without much effort. This means not just getting the incentives right, but also the "political revolution" that will be needed to implement them.

So I think not just about limits-to-growth but about the need for partial universal ownership of all the major sources of wealth, combined with limited stakeholder ownership (fossil fuels, large corporations, etc).

susan the other , February 18, 2017 at 2:39 pm

flow is entropy

HotFlash , February 18, 2017 at 3:26 pm

We believe Regenerative Economics can provide a unifying framework capable of galvanizing a wide array of reform groups by clarifying the picture of what makes societies healthy. But, this framework will only serve if it is backed by accurate theory and effective measures and practice. This soundness is part of what Capital Institute and RARE are trying to develop.

Accuracy of analytical method aside, who will implement it? Who can? Not those 8 dudes with 1/2 the world's wealth.

Hilario , February 18, 2017 at 5:01 pm

And what does extreme economic equality lead to?

witters , February 18, 2017 at 5:40 pm

Give me all your income and wealth and let us find out

Steve Roth , February 19, 2017 at 4:42 am

Not really a salient issue for us at the moment, is it?

Carla , February 19, 2017 at 2:40 pm

Equality–economic or any other kind–cannot be extreme. Equality exists, or it does not.

Temporarily Sane , February 19, 2017 at 8:02 pm

That depends on what kind of inequality you're talking about. Men being paid $10/hr and women $8/hr to perform the same task is an example of "binary" inequality. Either everyone is paid the same wage (before the first performance review anyway) or they are not.

Income inequality is a bit different. If a CEO takes home 20 x more per year than the lowest paid worker in the company income equality is low (way lower than in any modern capitalist economy) if the CEO makes 300 x as much as the lowest paid worker, it is high. Income equality – everyone being paid the same wage regardless of what they're doing to earn it – is not the goal. Rather, it is reducing the gap between the lowest and highest paid members of society.

Scott , February 18, 2017 at 6:31 pm

Only jet settesr get the advantages of civilization at its heights. My own partial solution has been an airport nation that advances flying literacy and availability.
There is an amorphous factor arising out of the defined structure and standard rights afforded travelers & businesses based on a separate airport nation. (I admit this amorphous factor which causes me some presentation problems.)
No human system will function without a common committed belief in it.
Airport movement of people & parcels is simpler to make comprehensive.
For example I have difficulty in attempting to expand passenger service in NC because the corporation Norfolk Southern was given power to inhibit it while getting the advantages of state responsibilities created with a buyout of a rail company state company where it was controlled by shareholders.
A trick was done on us with the collusion of legislators.
We can simply say the RR as analogous is a matured industry to the point of immaturity compared to an international airport accommodating both freighters & passenger airliners.
These things will not directly make an economic theory, but are about economic activity as enabled from basic port theory & the sociology of ports.
For instance I advise women in nations prone to put them at a disadvantage to put business offices on international airports which tend to be more culturally neutral.

Chauncey Gardiner , February 19, 2017 at 12:12 am

Appreciated the author's thought-provoking observations about the effects of extreme concentration of wealth, with its enormous feedback loops and low circulation of money that materially reduce the overall debt servicing capacity of the private sector. But I also felt that she understated the roles that private sector debt growth, central bank monetary policy, asset price speculation and manipulation, and financial fraud have historically played in causing economic collapse.

Gman , February 19, 2017 at 8:38 am

Playing Devil's Advocate I suppose you could argue that there is something Darwinian about the way things are nowadays.

Apex predators are indeed flourishing and in a curious way they are searching further afield and adapting to new 'food sources' as those closer to home become less appealing, less nourishing and less worth the effort of expending the energy trying to exploit, particularly when other tastier morsels are so plentiful and readily available elsewhere.

Maybe we should just all get with the programme, know our places in the grand scheme of things and resign ourselves to our evolutionary fate?

;-)

LT , February 19, 2017 at 12:10 pm

If it's Darwinian, it's an example of artificial selection – nothing natural about it.

Gman , February 19, 2017 at 3:47 pm

'Life is like a box of chocolates. More and more people know what they're gonna git'

Darwin's artificial selection.

St Jacques , February 19, 2017 at 5:20 pm

haha, unfortunately it's the apex predator species that is in danger of sudden extinction as its prey declines. Of course the Darwinian analogy doesn't hold up well because Darwinian selection works on all individuals of a species without distinction. A much better analogy is a rigged game.

Altandmain , February 19, 2017 at 10:09 am

We basically have an economic system where the very rich steal the productive capacity of the rest of us and add it to their own wealth.

That is the dirty not so secret truth. As the Spirit Level demonstrates, inequality is as bad for the rich at times as it can be for the rest of us.

There is also this:
https://www.theatlantic.com/magazine/archive/2011/04/secret-fears-of-the-super-rich/308419/

Our problem is that the rich really suck. They are greedy and I would not be surprised if many were psychologically diagnosed with anti social personality disorder. They are without integrity and would fight tooth and nail for their pilfered money.

But the status quo is like the Congo under Mobut Sese Seko. It is a society build on kleotocracy. Like any such society, it is inherently unstable with money going to a few.

The late 1960s had problems. The costs of the Vietnamese War, the excess deficit spending, and the dependence on Middle Eastern oil all lead to problems in the 1970s.

Ruben , February 19, 2017 at 12:24 pm

"As Paul Samuelson stressed, that assumption [propensity to equilibrium] is necessary for economics to be science, as in mathed up, and the dominance that economists have achieved is due to their scientific appearances and the fact that their mathematical exposition enables them to dismiss lay critics."

Why? Non-equilibrium is accessible to maths.

In branching systems such the one imagined for monetary flow in this article, growth in the number of nodes at the terminals (and thus necrosis of excess of nodes) is controlled/limited by the number of terminals of the branching, let's call these capillaries, that can be accommodated inside the volume of the whole versus the number of nodes than can be accommodated inside the whole. Since the total number of capillaries grow at a lower rate than the number of nodes as the volume of the whole increases, growth is limited and excess growth in times of higher volume of the whole suffers necrosis when the volume of the whole shrinks.

IHTH

[Feb 19, 2017] The Shadow Governments Destruction Of Democracy

Notable quotes:
"... "The Deep State does not consist of the entire government. It is a hybrid of national security and law enforcement agencies: the Department of Defense, the Department of State, the Department of Homeland Security, the Central Intelligence Agency and the Justice Department. I also include the Department of the Treasury because of its jurisdiction over financial flows, its enforcement of international sanctions and its organic symbiosis with Wall Street." ..."
"... "It's agencies like the CIA, the NSA and the other intelligence agencies, that are essentially designed to disseminate disinformation and deceit and propaganda, and have a long history of doing not only that, but also have a long history of the world's worst war crimes, atrocities and death squads." ..."
"... Greenwald asserts the the CIA preferred Clinton because, like the clandestine agency, she supported regime change in Syria. In contrast, Trump dismissed America's practice of nation-building and declined to tow the line on ousting foreign leaders, instead advocating working with Russia to defeat ISIS and other extremist groups. ..."
"... "So, Trump's agenda that he ran on was completely antithetical to what the CIA wanted," Greenwald argued. "Clinton's was exactly what the CIA wanted, and so they were behind her. And so, they've been trying to undermine Trump for many months throughout the election. And now that he won, they are not just undermining him with leaks, but actively subverting him." ..."
"... But on the other hand, the CIA was elected by nobody. They're barely subject to democratic controls at all. And so, to urge that the CIA and the intelligence community empower itself to undermine the elected branches of government is insanity. ..."
"... He also points out the left's hypocrisy in condemning Flynn for lying when James Clapper, Director of National Intelligence during the Obama administration, perpetuated lies without ever being held accountable. ..."
Feb 19, 2017 | www.zerohedge.com
And on the heels of Dennis Kucinich's warnings , The Intercept's Glenn Greenwald, who opposes Trump for a variety of reasons, warns that siding with the evidently powerful Deep State in the hopes of undermining Trump is dangerous. As TheAntiMedia's Carey Wedler notes , Greenwald asserted in an interview with Democracy Now, published on Thursday, that this boils down to a fight between the Deep State and the Trump administration.

Though Greenwald has argued the leaks were "wholly justified" in spite of the fact they violated criminal law, he also questioned the motives behind them.

"It's very possible - I'd say likely - that the motive here was vindictive rather than noble," he wrote. "Whatever else is true, this is a case where the intelligence community, through strategic (and illegal) leaks, destroyed one of its primary adversaries in the Trump White House."

According to an in-depth report by journalist Mike Lofgren:

"The Deep State does not consist of the entire government. It is a hybrid of national security and law enforcement agencies: the Department of Defense, the Department of State, the Department of Homeland Security, the Central Intelligence Agency and the Justice Department. I also include the Department of the Treasury because of its jurisdiction over financial flows, its enforcement of international sanctions and its organic symbiosis with Wall Street."

As Greenwald explained during his interview:

"It's agencies like the CIA, the NSA and the other intelligence agencies, that are essentially designed to disseminate disinformation and deceit and propaganda, and have a long history of doing not only that, but also have a long history of the world's worst war crimes, atrocities and death squads."

Greenwald believes this division is a result of the Deep State's disapproval of Trump's foreign policy and the fact that the intelligence community overwhelmingly supported Hillary Clinton over Trump because of her hawkish views. Greenwald noted that Mike Morell, acting CIA chief under Obama, and Michael Hayden, who ran both the CIA and NSA under George W. Bush, openly spoke out against Trump during the presidential campaign.

Greenwald asserts the the CIA preferred Clinton because, like the clandestine agency, she supported regime change in Syria. In contrast, Trump dismissed America's practice of nation-building and declined to tow the line on ousting foreign leaders, instead advocating working with Russia to defeat ISIS and other extremist groups.

"So, Trump's agenda that he ran on was completely antithetical to what the CIA wanted," Greenwald argued. "Clinton's was exactly what the CIA wanted, and so they were behind her. And so, they've been trying to undermine Trump for many months throughout the election. And now that he won, they are not just undermining him with leaks, but actively subverting him."

"[In] the closing months of the Obama administration, they put together a deal with Russia to create peace in Syria. A few days later, a military strike in Syria killed a hundred Syrian soldiers and that ended the agreement. What happened is inside the intelligence and the Pentagon there was a deliberate effort to sabotage an agreement the White House made."

Greenwald, who opposes Trump for a variety of reasons, warns that siding with the evidently powerful Deep State in the hopes of undermining Trump is dangerous. "Trump was democratically elected and is subject to democratic controls, as these courts just demonstrated and as the media is showing, as citizens are proving," he said, likely alluding to a recent court ruling that nullified Trump's travel ban.

He continued:

"But on the other hand, the CIA was elected by nobody. They're barely subject to democratic controls at all. And so, to urge that the CIA and the intelligence community empower itself to undermine the elected branches of government is insanity."

He argues that mentality is "a prescription for destroying democracy overnight in the name of saving it," highlighting that members of both prevailing political parties are praising the Deep State's audacity in leaking details of Flynn's conversations.

As he wrote in his article, " it's hard to put into words how strange it is to watch the very same people - from both parties, across the ideological spectrum - who called for the heads of Edward Snowden, Chelsea Manning, Tom Drake, and so many other Obama-era leakers today heap praise on those who leaked the highly sensitive, classified SIGINT information that brought down Gen. Flynn."

He also points out the left's hypocrisy in condemning Flynn for lying when James Clapper, Director of National Intelligence during the Obama administration, perpetuated lies without ever being held accountable.

[Feb 19, 2017] https://nyti.ms/2luxitI

Feb 19, 2017 | nyti.ms

NYT - Masha Gessen - Feb 18

Everybody lies. But American politics has long rested on a shared understanding of what it is acceptable to lie about, how and to whom.

One of the many norms that Donald J. Trump has assaulted since taking office is this tradition of aspirational hypocrisy, of striving, at least rhetorically, to act in accordance with moral values - to be better. This tradition has set the standard of behavior for government officials and has shaped Americans' understanding of what their government and their country represent. Over the last four weeks, Mr. Trump has lashed out against any criticism of his behavior, because, as he never tires of pointing out, "We won." In requesting the resignation of his national security adviser, Michael T. Flynn, however, Mr. Trump made his first public concession to political expectations. Hypocrisy has scored a minor victory in America. This is a good thing.

The word "hypocrisy" was thrown around a lot during the 2016 presidential campaign. Both Mr. Trump and Bernie Sanders accused their respective parties and the country's elites of hypocrisy. As the election neared, some journalists tried to turn the accusation around on Mr. Trump, taking him to task, for example, for his stand on immigration. If Mr. Trump favored such a hard line on immigration, the logic went, should he not then favor the deportation of his own wife, Melania, who was alleged to have worked while in the United States on a visitor's visa?

The charge of hypocrisy didn't stick, not so much because it placed its proponents, unwittingly, in the distasteful position of advocating the deportation of someone for a long-ago and common transgression, but because Mr. Trump wasn't just breaking the rules of political conduct: He was destroying them. He was openly claiming that he abused the system to benefit himself. If he didn't pay his taxes and got away with it, this made him a good businessman. If he could force himself on women, that made him more of a man. He acted as though this primitive logic were obvious and shared by all.

Fascists the world over have gained popularity by calling forth the idea that the world is rotten to the core. In "The Origins of Totalitarianism," Hannah Arendt described how fascism invites people to "throw off the mask of hypocrisy" and adopt the worldview that there is no right and wrong, only winners and losers. Hypocrisy can be aspirational: Political actors claim that they are motivated by ideals perhaps to a greater extent than they really are; shedding the mask of hypocrisy asserts that greed, vengeance and gratuitous cruelty aren't wrong, but are legitimate motivations for political behavior.

In the last decade and a half, post-Communist autocrats like Vladimir V. Putin and Viktor Orban have adopted this cynical posture. They seem convinced that the entire world is driven solely by greed and hunger for power, and only the Western democracies continue to insist, hypocritically, that their politics are based on values and principles. This stance has breathed new life into the old Soviet propaganda tool of "whataboutism," the trick of turning any argument against the opponent. When accused of falsifying elections, Russians retort that American elections are not unproblematic; when faced with accusations of corruption, they claim that the entire world is corrupt.

This month, Mr. Trump employed the technique of whataboutism when he was asked about his admiration for Mr. Putin, whom the host Bill O'Reilly called "a killer." "You got a lot of killers," responded Mr. Trump. "What, you think our country's so innocent?" To an American ear, Mr. Trump's statement was jarring - not because Americans believe their country to be "innocent" but because they have always relied on a sort of aspirational hypocrisy to understand the country. No American politician in living memory has advanced the idea that the entire world, including the United States, was rotten to the core. ...

Hungary's PM Viktor Orbanpraises Trump for saying countries should put their own interests first
http://www.independent.co.uk/news/world/europe/donald-trump-nationalist-hungary-pm-viktor-orban-praise-america-first-a7542361.html
Reply Saturday, February 18, 2017 at 02:26 PM ilsm said in reply to Fred C. Dobbs... the dems' deep state have already trodden the Bill of Rights how worse can it get......

fascism is in the US for 8 years or so. Reply Saturday, February 18, 2017 at 05:35 PM

[Feb 12, 2017] Instead of the endless perception management or strategic communication or psychological operations or whatever the new code words are, you could open up the files regarding key turning-point moments and share the facts with the citizens

Notable quotes:
"... This bizarre feature of Trump's executive order shows how deep Official Washington's dysfunction goes. Trump has picked a major constitutional battle over a travel ban that targets the wrong countries. ..."
"... But there's a reason for this dysfunction: No one in Official Washington can speak the truth about terrorism without suffering severe political damage or getting blacklisted by the mainstream media. Since the truth puts Israel and especially Saudi Arabia in an uncomfortable position, the truth cannot be spoken. ..."
"... There was some hope that President Trump – for all his irascibility and unpredictability – might break from the absurd "Iran is the principal source of terrorism" mantra. But so far he has not. Nor has Trump moved to throw open the files on the Syrian and Ukraine conflicts so Americans can assess how the Obama administration sought to manipulate them into supporting these "regime change" adventures. ..."
"... But Trump has resisted intense pressure to again entrust U.S. foreign policy to the neoconservatives, a number of whom lost their jobs when President Obama left office, perhaps most significantly Assistant Secretary of State for European Affairs Victoria Nuland, who helped orchestrate the violent overthrow of Ukraine's elected president and is an architect of the New Cold War with Russia. ..."
"... Other neocons who angled for jobs in the new administration, including John Bolton and James Woolsey, have failed to land them. Currently, there is pressure to ensconce Elliott Abrams, a top neocon dating back to the Reagan administration, in the key post of Deputy Secretary of State but that idea, too, has met resistance. ..."
"... The neocon threat to Trump's stated intent of restoring some geopolitical realism to U.S. foreign policy is that the neocons operate almost as an ideological cabal linked often in a subterranean fashion – or as I. Lewis Libby, Vice President Dick Cheney's neocon chief of staff, once wrote in a cryptic letter to neocon journalist Judith Miller that aspen trees "turn in clusters, because their roots connect them." ..."
"... What is less clear is whether Trump, Tillerson and his fledgling State Department team have the intellectual heft to understand why U.S. foreign policy has drifted into the chaos and conflicts that now surround it – and whether they have the skill to navigate a route toward a safe harbor. ..."
"... My first concern, however, is the USA predilection for 'regime change" wars - and for that I blame the neocons. ..."
Feb 12, 2017 | economistsview.typepad.com
RGC : February 10, 2017 at 06:44 AM

If you wanted to bring sanity to a U.S. foreign policy that has spun crazily out of control, there would be some immediate steps that you – or, say, Secretary of State Rex Tillerson – could take, starting with a renewed commitment to tell the truth to the American people.

Instead of the endless "perception management" or "strategic communication" or "psychological operations" or whatever the new code words are, you could open up the files regarding key turning-point moments and share the facts with the citizens – the "We the People" – who are supposed to be America's true sovereigns.

For instance, you could release what the U.S. government actually knows about the Aug. 21, 2013 sarin gas attack in Syria; what the files show about the origins of the Feb. 22, 2014 coup in Ukraine; what U.S. intelligence analysts have compiled about the July 17, 2014 shoot-down of Malaysia Airlines Flight 17 over eastern Ukraine. And those are just three examples of cases where U.S. government propagandists have sold a dubious bill of goods to the American and world publics in the "information warfare" campaign against the Syrian and Russian governments.

If you wanted to base U.S. foreign policy on the firm foundation of reality, you also could let the American people in on who is actually the principal sponsor of the terrorism that they're concerned about: Al Qaeda, Islamic State, the Taliban – all Sunni-led outfits, none of which are backed by Shiite-ruled Iran. Yet, all we hear from Official Washington's political and media insiders is that Iran is the chief sponsor of terrorism.

Of course, that is what Saudi Arabia, the Gulf states and Israel want you to believe because it serves their regional and sectarian interests, but it isn't true. Saudi Arabia and the Gulf states are the ones arming and financing Al Qaeda and Islamic State with Israel occasionally bombing Al Qaeda's military enemies inside Syria and providing medical support for Al Qaeda's Syrian affiliate operating near the Golan Heights.

The reason for this unsavory network of alliances is that Israel, like Saudi Arabia and the Sunni-led Gulf states, sees Iran and the so-called "Shiite crescent" – from Tehran through Damascus to Beirut – as their principal problem. And because of the oil sheiks' financial wealth and Israel's political clout, they control how pretty much everyone in Official Washington's establishment views the Middle East.

But the interests of Israel, Saudi Arabia and the Gulf states are not in line with the interests of the American people – nor the average European – who are not concerned about militant Shiites as much as militant Sunnis. After all, the worst terror attacks on Europe and the U.S. have come from Sunni extremists belonging to or inspired by Al Qaeda and Islamic State.

This gap between the reality of Sunni-extremist terrorism and the fantasy of Official Washington's "group think" fingering Shiite-ruled Iran explains the cognitive dissonance over President Trump's travel ban on people from seven mostly Muslim countries. Beyond the offensive anti-Muslim prejudice, there is the fact that he ignored the countries that produced the terrorists who have attacked the U.S., including the 9/11 hijackers.

This bizarre feature of Trump's executive order shows how deep Official Washington's dysfunction goes. Trump has picked a major constitutional battle over a travel ban that targets the wrong countries.

But there's a reason for this dysfunction: No one in Official Washington can speak the truth about terrorism without suffering severe political damage or getting blacklisted by the mainstream media. Since the truth puts Israel and especially Saudi Arabia in an uncomfortable position, the truth cannot be spoken.

There was some hope that President Trump – for all his irascibility and unpredictability – might break from the absurd "Iran is the principal source of terrorism" mantra. But so far he has not. Nor has Trump moved to throw open the files on the Syrian and Ukraine conflicts so Americans can assess how the Obama administration sought to manipulate them into supporting these "regime change" adventures.

But Trump has resisted intense pressure to again entrust U.S. foreign policy to the neoconservatives, a number of whom lost their jobs when President Obama left office, perhaps most significantly Assistant Secretary of State for European Affairs Victoria Nuland, who helped orchestrate the violent overthrow of Ukraine's elected president and is an architect of the New Cold War with Russia.

Other neocons who angled for jobs in the new administration, including John Bolton and James Woolsey, have failed to land them. Currently, there is pressure to ensconce Elliott Abrams, a top neocon dating back to the Reagan administration, in the key post of Deputy Secretary of State but that idea, too, has met resistance.

The neocon threat to Trump's stated intent of restoring some geopolitical realism to U.S. foreign policy is that the neocons operate almost as an ideological cabal linked often in a subterranean fashion – or as I. Lewis Libby, Vice President Dick Cheney's neocon chief of staff, once wrote in a cryptic letter to neocon journalist Judith Miller that aspen trees "turn in clusters, because their roots connect them."

In other words, if one neocon is given a key job, other neocons can be expected to follow. Then, any Trump deviation from neocon orthodoxy would be undermined in the classic Washington tradition of strategic leaking to powerful media and congressional allies.

So far, the Trump inner circle has shown the administrative savvy to avoid bringing in ideologues who would dedicate their efforts to thwarting any significant change in U.S. geopolitical directions.

What is less clear is whether Trump, Tillerson and his fledgling State Department team have the intellectual heft to understand why U.S. foreign policy has drifted into the chaos and conflicts that now surround it – and whether they have the skill to navigate a route toward a safe harbor.

https://consortiumnews.com/2017/02/09/trumps-foreign-policy-at-a-crossroads/

Julio -> RGC... , February 10, 2017 at 09:04 AM
Very good analysis.
The first and obvious question about the ban is "why isn't Saudi Arabia included"? As the article shows, this question unravels this (Trump's) current version of dysfunctional foreign policy based on misleading the public.
RGC -> Julio ... , February 10, 2017 at 09:43 AM
Yes, Trump seems to want to act directly but he also seems to often be off-target.

My first concern, however, is the USA predilection for 'regime change" wars - and for that I blame the neocons.

sanjait said in reply to RGC... , February 10, 2017 at 10:56 AM
I am all for transparency but very strongly opposed to asinine conspiracy theories.
RGC -> sanjait... , February 10, 2017 at 11:29 AM
Why should anyone care? Maybe you should actually learn something about a topic before you comment on it.

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

[Feb 12, 2017] Russia Will Not Sell Snowden To Trump; Heres Why Zero Hedge

Feb 12, 2017 | www.zerohedge.com

Submitted by Alexander Mercouris via TheDuran.com,

On Friday 10th February 2017 NBC circulated a report the Russian government in order to improve relations with the Trump administration was preparing to hand Edward Snowden over to the US.

The report obviously worried Snowden himself, who tweeted that the report proved that he was not and never had been a Russian agent . That suggests that he took the report seriously.

Snowden should not be worried, since the report is groundless and is clearly a provocation. To see why it is only necessary to look at the NBC report itself , which makes it clear who is behind it...

U.S. intelligence has collected information that Russia is considering turning over Edward Snowden as a "gift" to President Donald Trump - who has called the NSA leaker a "spy" and a "traitor" who deserves to be executed.

That's according to a senior U.S. official who has analyzed a series of highly sensitive intelligence reports detailing Russian deliberations and who says a Snowden handover is one of various ploys to "curry favor" with Trump. A second source in the intelligence community confirms the intelligence about the Russian conversations and notes it has been gathered since the inauguration.

(bold italics added)

It turns out that the story does not originate in Russia. It originates with our old friends the 'anonymous officials' of the US intelligence community.

One of these officials claims that the story is based on "intelligence" of "Russian conversations" that the US intelligence community has 'gathered since the inauguration". We have no way of knowing at what level these "conversations" took place, assuming they took place at all, but it is inconceivable that the US intelligence community is genuinely informed of discussions within the top level of the Russian leadership – where such a question would be discussed – or if it is that it would publicise the fact by blurting the fact out to NBC.

The reality is that there is no possibility of the Russians handing Snowden over to the US in order to please Donald Trump . Not only would doing so almost certainly breach Russian law – as Snowden's lawyer, who has denied the whole story , has pointed out – but it contradicts what I personally heard Russian President Putin say at the St. Petersburg International Economic Forum in 2014 when the subject of Snowden was brought up, which is that Russia never hands over people like Snowden once they have gained asylum in Russia. That is indeed Russian practice extending far back into the Soviet period, and I can think of no exceptions to it.

As it happens Russian Foreign Ministry spokesman Maria Zakharova has denied the story in a Facebook post which links it to the ongoing struggle between the Trump administration and the US intelligence community (about which see more below). Here is how RT translates her post

Today, US intelligence agencies have stepped up their work, updating two stale stories, 'Russia can gift Snowden to Trump' and 'confirmation found on the details of the scandalous dossier on Trump allegedly collected by an ex-employee of British intelligence.' But it may seem so only to those who do not understand the essence of the game. None of these statements have been made by representatives of the special services, but is information coming from NBC and CNN, citing unnamed sources. The difference is obvious, but only to experts. Yet it is useful for scandalizing the public and maintaining a degree of [public outrage] .

It is evident that the pressure on the new administration on the part of political opponents within the United States continues, bargaining is going on. And that's why the US foreign policy doctrine has not yet been formed

It is just possible that US intelligence overheard some gossip in Moscow about the Kremlin handing Snowden over to Donald Trump in order to curry favour with him. The various reports the US intelligence community released during the Clinton leaks hacking scandal show that the US intelligence community is not actually very well informed about what goes on in Moscow or how the Russian government works. In light of that it would not be entirely surprising if someone overheard some gossip about Snowden in Moscow which the US intelligence community is over-interpreting.

Far more likely however is that – as Maria Zakharova says – this is a deliberate provocation, spread by someone within the US intelligence community who either wants to signal to Moscow what Moscow 'needs to do' if it wants better relations with the US, or (more probably) as a signal to Donald Trump of the minimum the US intelligence community expects of him if he wants the US intelligence community's support in seeking better relations with Russia.

This story is interesting not because of what it says about what the Russians are going to do to Snowden – which in reality is nothing. Rather it is interesting because it shows the degree to which Snowden continues to be an object of obsession for the US intelligence community.

The reason for that is that the US intelligence community knows that Snowden is not a Russian spy.

As Snowden has pointed out, if he really were a Russian spy no-one in Washington would be talking about the Russians handing him over. The Russians do not hand their spies over any more than the US does, and if Snowden really were a Russian spy no-one in Washington would talking about the Russians handing him over.

However if Snowden had been a Russian spy his actions would in that case have been simply a Russian intelligence operation of which the US intelligence community was the victim, of which there have been many since the Second World War. Espionage is what the US and Russia routinely do to each other, and there would be nothing remarkable about Snowden in that case.

It is the fact that Snowden is on the contrary a deeply patriotic American who acted from patriotic motives that has the US intelligence community enraged and alarmed. From their point of view having a patriotic American publicly expose their practices Jason Bourne style is a far greater threat than have a Russian spy penetrate their systems, since because of the far greater publicity it is far more likely to damage them politically.

This explains the extraordinary feud the US intelligence community has waged against Snowden, which in part explains why it has become so hostile to Russia, the country which has become his protector.

Mr.Sono -> knukles •Feb 12, 2017 5:41 PM
Putin is a man of his words and not a little bitch like Obama. I was suprised that fake news was all over zerohedge regarding this topic, but at the end zerohedge confirmed the fake news.
Giant Meteor -> FreeShitter •Feb 12, 2017 5:35 PM
One of the smartest plays the deep state could make is allowing him back, make small fuss, and issue a pardon. It would go far in deflating, diffusing the situation, de minimis so to speak. But, I suppose it is more about absolute control, control of the narrative, full spectrum dominance, cautionary tales etc. Pride goeth before the fall (destruction) I believe. Eventually this laundry is going to get sorted and cleaned, one way or the other.
boattrash •Feb 12, 2017 5:13 PM
" as Maria Zakharova says – this is a deliberate provocation, spread by someone within the US intelligence community who either wants to signal to Moscow what Moscow 'needs to do' if it wants better relations with the US, or (more probably) as a signal to Donald Trump of the minimum the US intelligence community expects of him if he wants the US intelligence community's support in seeking better relations with Russia."

A full pardon from Trump would improve his standing with the American people, IMHO, on both the left and the right.

HumanMan -> boattrash •Feb 12, 2017 5:29 PM
This was my thought when the story broke. Putin can no longer claim to be a protector of human rights if he hands over Snowden...Unless Trump is going to pardon him. As you pointed you, that would be great (politically) for Trump too. Done this way would be a win win for the two and another win for We The People. On top of that, Putin doesn't want to babysit Snowden. I'm sure the Russians would be happy to have a politically expediant way to get the American spy out of their country.
HRClinton •Feb 12, 2017 5:16 PM
The Deep State rules, no matter what DJT thinks.

The roots go deep in my fomer DOS and in the CIA. Even in the DOD and Senate. Bill and I know this better than anyone.

FAKE NEWS:

On Friday 10th February 2017 NBC circulated a report the Russian government in order to improve relations with the Trump administration was preparing to hand Edward Snowden over to the US.

How many gringos were fooled???--- not many

shovelhead •Feb 12, 2017 5:37 PM
Pissgate II...

Brought to you from your friends at the CIA.

Mr. Crisp •Feb 12, 2017 5:50 PM
Snowden showed the world that the NSA wasn't just tracking terrorists, they were tracking pretty much everyone, everywhere. He deserves a full pardon.

[Feb 11, 2017]